“Why does the garbage man not understand his pension”- Tom Hibbard- KAS Bank


“I speak to everyone in the same way, whether he is the garbage man or the president of the university” – Albert Einstein


This quote has really resonated with me of late as I find myself reading more and more pensions-related communications. Communications seems to be a “hot topic” at the moment as we try as an industry to wrap our heads around the concept of engaging members and meeting regulatory requirements. In one such pensions communication I recently came across the below phrase and thought, I wonder how this looks to someone who hasn’t spent years studying statistics?


Stochastic modelling estimates the probable outcomes by allowing for random variations over time in one or more aspects of the projection. The random variation is based on fluctuations noted in historical data for a selected period using standard time-series techniques.”


Easy to understand? No is the obvious answer, and this explanation (I use the term lightly) is taken directly from a recent report sent to members as part of the glossary of terms to simplify matters! My colleague Emma kindly offered her services as my guinea pig on this one and promptly stated “I didn’t get a word of that from stochastic onwards.”


The point I am trying to make here is that how do we expect the general public who don’t live and breathe pensions to understand and engage with their savings when we don’t give them the chance to?


If we look a little deeper into this issue, we come to the question of how data and information is passed through the investment chain. Can we really blame IGCs, employers or trustee boards if they are not receiving clear information from their service providers? Is the data they receive genuinely in a standardised, clear and readable format that allows them to adapt this for the consumer?


Our industry has a reputation for both using jargon and its love of acronyms, catchphrases and technical terms. I came across a few amusing examples a couple of months ago in a book called ‘One Plus One Equals Three’ by Dave Trott. I see these industry misnomers on an almost daily basis yet had not considered beforehand how these weren’t really clear to non-investment buffs:

  • Credit really means debt;
  • Bailout is in fact pouring money in; and
  • Hedge funds are now unorthodox, leveraged and UNhedged investment tools


Getting back to the point, trustee boards must push for information that they can easily understand. Service Providers have a duty to present their clients with transparent data and after all, is this not one of the key elements in building trust among industry participants and creating an environment of good governance?


Tom Hibbard, Business Development Associate – Pensions at Kas Bank.


Well done Kas for giving Tom space to say these things- Pension Plowman


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to “Why does the garbage man not understand his pension”- Tom Hibbard- KAS Bank

  1. ancientllm says:

    Many years ago now I was a director of the Trustee Company (in house) that ran our multi-billion pound pension fund. It wasn’t so much the jargon as the rather worrying thought that our expert advisors didn’t seen to know what was going on either. Every year about this time we would get a selection of the great and good investment advisors to give us their views on the year ahead for investments. Every year we would ask for an explanation of why what they had said the previous year hadn’t happened, with the idea we could learn from this. Never could we get an answer, let alone a sensible one. Guess whose comments I no longer believe? So if those who earn their money from investments don’t have a clue, what hope has the “man on the Clapham omnibus”? And even if you do know what the quoted paragraph means (I do, sadly) it still doesn’t give you a clue as to whether the underlying stochastic processes are any basis for making any decisions (as a rule of thumb, they aren’t, see “managed motorways”). Perhaps it is time we scrapped financial instruments and returned to finance! Robin Rowles

  2. con keating says:

    With a Flesch reading ease score of 17.3 and a Flesch-Kincaid grade score of 15.8, this can only be expected to be understood by a handful of very highly educated readers. However, the porblem is that as we write in more accessible form the paragraph will lengthen and place extra demands on the time of readers. One of the major problems is precisely this trade-off that the Transparency Taskforce will have to address. More transparency and more disclosures will consume more trustee and others’time and then we will see skim and inattentive reading, with no real cognitive engagement. Even worse we will see disclosures which are designed by the discloser to shift liability to the client – pages and pages of license agreements written in totally incessible legalese – one of the most pernicious aspects of which is periodic revision of the license terms and conditions. The reality of course is that there is nothing that we can do as users – this is a take-it or leave-it situation. Fortunately we are not in that position when awarding mandates and can ensure that terms are approporiate for us. The communication problem though is serious – without solution of that, the disinfectant of transparency will be poured straight down the drain.

  3. henry tapper says:

    We live in the world of common data standards Con. Do you think it conceivable that we could create a standard IMA for all events with the only variable bing price?

  4. Brian Gannon says:

    it would be good if people did speak English rather than jargonese. However, even if the stochastic modelling paragraph were more clearly worded it would not change the fact that it is not a reliable predictor of what will actually happen in future. And no matter how clearly things are explained it is impossible to predict future returns. So really engagement with pensions requires constant engagement not a brief understanding which is all too briefly forgotten. In spite of their much maligned reputation this is where financial planners come in. They help individuals gain an understanding of risk and reward, but also help them regularly review the progress of their pensions, help them understand the fact that outcomes are variable, change over time and are uncertain. They help individuals plan for the future and give them an understanding of how the different types of income can be provided, and help individuals understand the range of options available to plan income and capital for a wide range of circumstances. SO they help individuals make provision to have the money they need when they need it. And no amount of printed words or robo advice can replace this service when done well.

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