Time to ditch the “institutional” from pensions

workplace advice


There has always been a gulf between retail and institutional pensions. But I have never felt it so inappropriate .

Retail pensions were sold on commission, organised by insurance company and regulated by the Treasury via the FCA and its predecessors.

Institutional pensions were bought by employers, organised by consultants and regulated by the DWP via the Pensions Regulator and predecessors.

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The ABI was the retail trade body funded by the insurers to keep margins high for financial advisers and the NAPF was the institutional  trade body funded by the asset managers to keep consultancy margins high.

But the retail pensions market has reinvented itself. The Retail Distribution Review did for commission. Auto-enrolment has forced first the OFT review and the DWP’s radical curbs on workplace pensions (Cap et al). The business of getting 1,3m employers into funded workplace pensions has cut through the Regulatory crap.

Finally, the dam finally burst on annuities who have been swept away by the Treasury reforms like those factories in the Ruhr. The consumer has been given back freedom and choice.


But there has been little or no change in “institutional pensions”. Lawyers are still arguing how to sort out GMP reconciliation, debate is continuing about appropriate LDI strategies and arguments rage over all kinds of obscurities that have no interest or relevance outside a small coterie of a few thousand pension professionals.

And yet it is these professionals, these institutional investors, who claim to be in charge. They are as far from the consumers as I have ever known them!

Their various PR departments have told us that “The interests of the consumer have always been paramount”, but over the years, the consumerists have been marginalised by the trade bodies, rubbished as self seeking publicists and excluded from the central debate.

When Martin Lewis told the NAPF that they were irrelevant at its conference two years ago, the NAPF didn’t sit up, they shut up. Ros Altmann has been consistently derided by both the ABI and the NAPF, John Quarrell was put in a box when he started lifting various stones.

There have been exceptions to this, Robin Ellison and Alan Pickering have both been a part of the magic circle in the NAPF and worked for the member interests but by and large the NAPF has become a trade body for its principal sponsors and has become increasingly detached from the issues that trouble ordinary people.

So when Osborne announced the Treasury Retirement Reforms in this year’s budget, the NAPF were “perplexed”. I am sure by using that word, Joanne Seagers wanted to speak for her membership, sadly she spoke to her membership. She told them that she had neither been consulted nor had seen this coming.

Jo Segars- exhausted!

Jo Segars- exhausted!

If she had listened to my and Jenny Davidson’s presentation on the failure of occupational schemes to deal with the problems of annuities, she might have been wiser but , despite the presentation happening in the NAPF’s offices, she declined to Chair. The NAPF have more important things to worry about than how people draw their pensions.

Recently I had the chance to attend meetings at the FCA which input into the recent consultation response on the Guidance Guarantee, the pillars of the institutional pensions industry were nowhere to be seen.

It is the same story on the big issues surrounding workplace pensions. The great hope of the NAPF was the Pension Quality Mark, but the introduction of Minimum Quality Standards by the DWP has paid no heed to PQM. PQM has been destroyed by the democritisation of pensions resulting from the extension of employer participation to all the 1.3m employers in the UK (not just the 200 participating in PQM).

The NAPF, despite having a chance to take charge of the debate on transparency on cost and fees, have dropped the ball. The ball has been picked up by the DWP and the FCA and the Treasury. The tough truths about the (mis)behaviour of some of their sponsoring asset managers and the failures of consultants to bring them to heel, proved too difficult.

Which is a shame. Like English cricket, the institutional pensions industry has become too much of a closed shop. It hears the criticism but pulls up the drawbridge, content to ride the storm out, But the great pensions issues of today touch upon their membership – the sponsors and trustees of our legacy of DB and occupational DC schemes.

A 10% fall in the costs of asset management could make a material improvement to a DB scheme’s funding position.

The annuity changes effect occupational DC and money purchase AVCs as much as they do contract-based plans.

The opportunities presented by CDC are as relevant to the CFO and CEO as they are to those on the production line.

The idea that that there are “institutional” and “retail” pensions is old fashioned and frankly obsolete.

The NAPF, their sponsors and their regulator (the Pension Regulator) now live in a democratised pensions world. This is a world where the future choices will be DC of CDC, where asset managers will be judged by their efficiency as much as by strategy, where consultants will have to worry about payroll interfaces more than manager selection.

The new voice of pensions is  no longer the NAPF , the Pensions Regulator sits on the side lines of pension regulation. Pensions is at the centre of the political debate as we will find out in the months leading up to next year’s election.

For those in “institutional pensions” to be heard in this debate, they need to start listening to Martin Lewis, Ros Altmann and bloggers like me.


For the Pensions Regulator (or at least its DC function) to become relevant to the debate, they must concentrate less on closing stable doors and more on the strategic changes surrounding retirement and the management of workplace pensions. It  should take a look at what their colleagues in the auto-enrolment team are doing and start making themselves relevant to the million plus smaller companies yet to purchase a workplace pension.

There is still a gulf between institutional and retail pensions but it is so nonsensical today that I cannot see it lasting. I want to see a strong NAPF, not no NAPF- but for it to be strong it must change, ditch failing initiatives and embrace the new realities. Its sponsors must change too and so must the consultants but I have not got the space or time to deal with these issues now.

Finally, we need change in Brighton, with the Pension Regulator. It needs to be aligned with the needs of the DWP and Treasury. It must ditch its complex voluntary frameworks and learn to keep it simple. This diagram makes no sense to anyone but the “institutional”.



This post first appeared in http://www.pensinplaypen.com/top-thinking


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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