“Only rich people think small amounts don’t matter”

rich and poor

That’s a quote from Debora Price and I’m making it a strap for whatever campaign I can cobble together to make Government Incentives happen for those who qualify for them , but can’t get them because their trustees don’t collect them on their behalf.

“Let them eat cake” said the Queen, before she found out crowd could turn on her. I don’t think the trustees and pension managers of many of our largest pension schemes know much more about household economics than Marie Antoinette.

“How does it feel?” asked Bob Dylan, “when you’re having to be scrounging your next meal?”.  Many of the people on zero hours contributions , will be paying into an auto-enrolment and collecting from a food bank. I hope those sitting on the newly formed master trust committee of the PLSA remember that fact before they sweep the issues created by net pay under the counter.

Our new Prime Minister entered office claiming to be on the side of those “just getting by” but their rights to the incentives they’ve been given to join a workplace pension and keep contributions going are not being given them, and – what’s worse- they aren’t even being told about what is going on.

De minimis

If we think £12.50 per month is “de minimis”, then we’re not thinking in the language of those for whom it does. Not only do they not speak Latin, but they have never spoken Latin (remember Latin was for rich people , pictures on window for the rest. I can’t remember what the Latin for £12.50 would be, but it does not translate into de minimis if you walk accross town to shop in Aldi.

De minimis means a trifling matter but it’s applied to a lot of pension numbers. If you have less than £10,000 in your pension pot, your pot is considered “trifling”. I’m sure it is trifling if you are worried about how much 55% tax you’ll be paying on your pot worth more than one million pounds, but £10,000 is a huge amount if you can’t afford the bus home.

Who fights these fights?

Everything is stacked against the low paid.

  • Their vote is disregarded (they don’t vote as much.
  • Their voice is ignored – no one’s listening now that they are de-unionised
  • Their plight is forgotten -amid the opulent self-congratulations of pension conferences.

Ros Altmann fights the fight for the Government Inventive, and gets booted out of Government for her pains. I fight the fight, but I’m as welcome at a PLSA committee as a fart in a lift. The voice of those who are not considered “core” to the membership of pension schemes is the plight of those who are not considered “core” to society.

Many of these people are going to end up in years to come unable to receive state benefits and being told they should have saved harder would they could. These are people who made sacrifices to be in a pension schemes and who are being denied what our democratically elected parliament has agreed are their universal rights. This is scandalous.

What needs to be done

Unions and trade bodies should take blame

I know of one large DC pension scheme where the staff union are about to embark on a hugely expensive exercise to fight what is considered the social injustice of unequalised GMPs for members of its final salary scheme. Meanwhile, hundreds of members of its DC schemes are caught in the net-pay trap. The union is fighting the wrong fight for the wrong people.

We need to increase awareness of this problem, not just with trustees and employers but with employee representatives and – yes – with the affected employees themselves.

The reason given  for ignoring the issue (other than that the problem is trivial), is that most occupational pension schemes are not set up to operate on a relief at source basis. I don’t buy this. Employer payrolls know exactly how to administer relief at source. What is missing is the willingness of those who run the administration systems on which these schemes operate, to offer relief at source payment systems.

Consultants should take blame

I particularly point to the large benefit consultants who have proprietary software which they resell to the market. You lot know who you are but for the record, JLT (Profund), Willis Towers Watson, Xafinity(Compendia), Mercer and Aon are involved in administation, have proprietary software and either run their own or power other’s workplace pension mastertrusts. There are smaller consultancies too who either run their own master trust (Salvus for example) or run white labelled versions of someone else’s. The point is that all the consultancy backed master trusts (without exception) are operating on net pay and those single occupation DC trusts are being advised by these consultancies and sit on their software (and that includes First Actuarial – my own).

If we are in the business of advice, the consultancies must take the lead. But we are compromised by conflicts of interest that makes it hard. For my own firm, I will say that we consider the long term future of unbundled DC plans operating on net pay to be confined to executive arrangements, they are not mass market products. We will continue to promote the use of contract based plans over our own TPA service and to move- where Trustees permit, future contributions to relief at source arrangements.

Trustees should take blame

We do not have control of our software. Nor do most trustees, but I do not exempt trustees from their responsibilities. Schemes such as People’s Pension , NEST and Supertrust have found a way to run relief at source within an occupational scheme. Now can’t (they are tied to JLT’s Profund  (non) solution. But NOW have taken it upon themselves for another year , to provide a manual work-a -round from their own pocket.

Consultancies, trustees unions and employers need to start by taking this problem seriously and they need to end by finding a solution PDQ. It is shocking that tPR has completely ignored this problem in its recently published DC Code. The Pensions Regulator should be at the front not the back of the queue calling for change.

Government should take blame

Finally, Government itself, starting with the Pensions Minister Richard Harrington and ending with the new Prime Minister Theresa May, should do what it says on the packet and stand up for those who are “getting by”.


A societal problem, a social solution

We all should accept we have and are failing our poorest pension contributors and we should set about remedying that now.

We must identify who is affected and may be affected

We must contact them and raise awareness before not after the problem has become critical

We must set about changing systems to stop the problem

We should be following NOW’s lead and setting about restitution without delay.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to “Only rich people think small amounts don’t matter”

  1. John Mather says:

    £12:50 could it be £XII:L

  2. Excellent piece.

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