“We don’t know what we’re doing”!

Greg McClymont at election count May 2009

Greg McClymont at election count May 2009 (Photo credit: Wikipedia)

To the average fan it is not the fans or player or clubs that bring the game into disrepute it is the referee – hence the chants the politest of which is “you don’t know what you’re doing”.

But it’s never that simple. What the crowd can see from the stands is different from what the ref sees close up and though we moan, we know that football has proper rules which are well enforced and we get (with the odd aberration) fair results.

In an environment where we are sure of the fundamentals we can set up our own rules to make sure that our business is carried out properly.

But when we don’t know the rules of the game, or when we sense the players are running rings down the ref, we walk away from the game feeling cheated (as is the match had been fixed).

So I sat down at the beginning of this year with this text-book advice staring at me .

Write goals that actually get done. SMART goals are goals that are specific, measurable, achievable, realistic, and time-bound.

Could I  be smart or did I have to be as dumb as I’d been for the past twenty years? My conclusion was that I could be as smart as I liked but unless I knew what I was doing, setting these goals was a waste of time. I am setting out to get SMART.

In the autumn, the Government will begin a consultation on what workplace pensions will look like over the remaining years of the AE staging period and beyond.

While this consultation is overtly about a cap on charges for a default fund, it is hard to see how it cannot touch upon “the minimum standards” required for the services offered within the cap;  More fundamentally the consultation needs to confirm what services fall within the charge cap and what do not.

The fundamental asymmetry of information that has meant that all attempts so far to control the behaviour of financial services company in the workplace have failed is this.

While the practitioners – broadly speaking those who design,price, market and distribute workplace pensions know what is going on, the Regulators don’t.

In short, they have not been SMART because others have been smarter.

This is why the OFT had to be bought in at the behest of Gregg McClymont and why Steve Webb has had to be bounced into market intervention. As Webb has said “it seemed inconceivable to me, when I took this job on, that there were not rules governing what a workplace pension should look like”.

Well of course there were rules of a sort. Stakeholder pensions were governed by a charge cap of 1%pa on the fund but it was never quite clear what the specifics of that charge included and many Stakeholder pensions have for long operated with total costs to members well in excess of 1%.


It is only now, with the help of Morningstar and True and Fair that the man in the street can establish what the costs on his fund really are and (using the advanced button) the total cost of the service provided. If he is using a multi-manager fund of hedge funds on a funds platform he may well be paying 4% pa for the privilege which in a low inflation environment where the gross performance target is inflation +4%, could mean that on-target performance could disguise zero growth on the fund.

Yet this fund might declare no more than a 0.5% annual management charge.

We have got used to being given this kind of misinformation and because the managers and their trade bodies have got away with it, we, both individually and collectively, have been duped. We don’t know how we’ve been duped but when we compare the outcomes of our savings plans with the performance figures we are handed and the projections we got when we started out, we experience anger which leads to the fury of many consumers whenever pensions are mentioned.

Thankfully, we have at last a conscientious pension minister, an inquisitive  shadow pension minister and a number of consumer champions within the funds industry prepared to use their personal time and resources to educate us individually and collectively about what is really going on.

So at last the “asymmetry of information” is looking like it is going to change to a point that those who regulate workplace pensions know as much as those who operate ,market and distribute them.

This has been and will be a very painful process since it involves admissions on both sides of deficiencies. The OFT report will (I hope) make it clear that the mess that pensions has got itself in has been as much a matter of poor governance as of provider malpractice and no-one on our side of the fence will find it comfortable reading.

However it will form part of the process of healing that may eventually lead to us being proud of our pension system again.

We must set minimum standards that are not specific, measurable, achievable, realistic, and time-bound.

But to do so , we need to understand what these adjectives mean in the

English: Steve Webb MP makes a speech at the L...

English: Steve Webb MP makes a speech at the Liberal Democrat Autumn conference 2008. (Photo credit: Wikipedia)

context of the pension reforms we have embarked upon.

That means we must be honest and open about our affairs in a way that we have not been , till now.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to “We don’t know what we’re doing”!

  1. Pingback: If I were Steve Webb.. | The Vision of the Pension Plowman

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