If that’s all there is my friends – well let’s keep working!


The numbers are out , extracted by the tenacious Josephine Cumbo

Jo and I probably share differing levels of disappointment, my expectations were low and have been met, hers were in line with Government forecasts and haven’t.

My take as a 53 year old who has only 16 months till I can get a Pension Wise meeting is that I am not overwhelmed at the prospect. I suspect I can get most of what Pension Wise can tell me in a formulaic way watching this

This is not a criticism of Pension Wise, it is an observation about where Pension Wise takes me.

I am not enamoured of the prospect of having to meet a financial adviser to arrange a drawdown plan, nor of paying a lot of tax to have money in my bank account nor of having to buy in to current annuity rates. I am not impressed by the choices ahead and like over 900,000 of the 925,000 who have been on the Pension Wise website, I am happy to conduct my research on-line.

I appreciate I spend more time on this than most.

People aren’t getting what they want

62% of the people Aon Hewitt surveyed described what they wanted from their retirement savings as a pension. They wanted certainty, high income conversion rates and protection against money running out before they did.

In time they may want this kind of arrangement to help them with accidental expense , such as the need to pay for long-term nursing care.

No one has yet created a simple solution that does all these things. The solutions that provide higher income do not provide longevity protection (relying on a later life annuity decision that becomes harder the later you leave it). The cash in the bank plans don’t come close to providing certainty in any respect and annuities only provide pleasure through schadenfreude

This is not going to be delivered by paternalistic employers

The huge legislative effort to get the Scheme Pensions Act over the line prior to the end of the last parliament has left us with an opportunity to do knew things through collective benefit schemes- target pensions – CDC schemes.

So far, CDC has been marketed wrong, either as a way of easing the pressure on employers to pay DB guarantees or as an alternative to DC pensions for large employers who want to go back to the days before DB was guaranteed.

But to me CDC is not for employers, it’s for the 925,000 “pension curious” people who’ve been on the Pension Wise site and the 907,000 who haven’t been to a Pension Wise meeting. It’s probably for most of the 18,000 who have.

They are looking for somewhere to invest their pension savings that will give them

Certainty, high income conversion rates and protection against money running out before they do

The last thing on these people’s mind is their employers! These are people who are thinking about walking away from employment and enjoying the rest of their life exercising the freedom to do what they want, not what their boss wants them to do.

And employers have no wish to set up some model village for their retirees, some latter day Port Sunlight or Bourneville. They want “separation” from the outcomes of their former employees decisions (while doing all they can to empower them make the right ones).

Solutions are on the design board but not in production

It is perfectly possible for large cohorts of the population . like the 925,000 of us who have been on the Pension Wise website, to start out own collective pension arrangement, invest our money collectively, manage the distribution of income prudently and insure ourselves as a collective pool.

This can be achieved using a mutual structure such as those which we have created in the past to buy houses (building societies) lend money to each other (credit unions) , insure against calamity (insurance) and provide assurance of comfort in extreme old age (mutual pension funds).

What we are not going to get , this time around, is an un keepable guarantee. Even the state cannot guarantee what it can pay us twenty, thirty , forty years from now. Employers are being ruined by promises made twenty, thirty forty years ago (promises that were later converted into guarantees.

The point of these mutual organisations is that they can focus on delivering good outcomes and not of providing a living for the financial services industry. If they are managed properly they can distribute 100% of the assets of the fund over time through smoothing. By properly understanding and managing the longevity of the pool of folk in the fund, the pension can assure those in extreme old age that the money will not run out before they do.

All these things are perfectly possible. We have been doing these things in this country for 70 or more years and hopefully we have learned from our mistakes (over-distribution, lack of controls on costs and poor longevity assumptions).

We have, which we have not had before, machines to help us in the management of collective schemes and means to invest that reduce the cost of intermediation providing a higher percentage of the market return is distributed than might previously have been the case. We have a Government that understands governance and we have a means of running these schemes (with the help of a well thought through primary legislated framework).

A default way to spend our pension savings.

Many – indeed most – of those 925,000 who are interested enough in Pension Wise to go on its site, have done well enough and saved into retirement savings schemes for a pension.

Most want a pension- some will want it as a guaranteed annuity – some will take their chances with individual drawdown – but most of us want something as simple on the way down as we had on the way up.

On the way up we had a default savings structure which guided us as to how much to save and where to save and rewarded us with incentives for doing it right. That’s exactly what most of us want on the way down.

If I tell you that you can have it- you wouldn’t believe it, if the Government told you you could have it, you might believe them!

If we built it – would we come. I suspect that what we need is not a Pension Plowman but a Pension Noah, otherwise we are going to have a lot of pensioners in the next few decades in the soup!

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 If that’s all there is my friends – well let’s keep working!

  1. brianstansted62@hotmail.com says:

    so how do you do it ? What difference is there between what you are saying and a with profits fund that is run on a nil return to shareholders basis? How does pooling in this way ensure fairness to all? What actual assets would such a fund invest in to ensure there would be certainty for investors? I don’t understand the actual investments and assets such collective schemes would invest in? Surely it would simply be a target pension income rather than a guaranteed pension income? I would like to know how this would actually work if I brought seven sheep seven cows seven goats and two of every type of pensioner to the CDC Ark?

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