“It’s not what you’re saying, it’s what we’re hearing”. DB needs clearer messaging.

farmer and the cowboy

I hate falling out with old friends so I wasn’t happy when Raj Mody phoned me and told me that I’d pissed him off. Well he put it more mildly than that but when an actuary says he’s disappointed, you know they’re pissed off, and when they’re disappointed with your personal comments – you hear “I’m pissed off with you”.

Now Raj has been criticised by me for allowing PWC’s Skyval index to make a fool of him. Before I go on, I’ll admit that I went in to that tackle with two feet and I’m giving myself a yellow card (could have been a red!). I’ll keep the blog up for a few days (as an act of penance) but this blog  will supersede it

The Guardian reported in September that the valuations of DB Deficits had collectively grown by £100m. In October PWC tell us they’ve decreased by £60-90bn (depending on what side of the bed you got out of). One month we breathed in, another out. One month we were sad, the next happy. Get out on the “funding” side of the bed and it’s £60bn, get out on the buy-out side of the bed and it’s £90bn. The Guardian’s October version of the Skyval story does not comment on this volatility. But the only conclusion a non-pension person could draw was that the Skyval numbers are good for nothing.

Now here’s the problem. What Raj was saying to himself and to his colleagues and what he thought he was saying to me was that these numbers were ludicrous and that the basis of these valuations was crazy.

What Pension Plowman and (I suspect) a lot of Guardian readers who had not read the PWC source material were being told was that deficits were on a billion pound yo-yo and that pensions were totally out of control

Raj has told Professional Pensions that

“There may be more appropriate measures that are better tailored to a scheme’s own funding strategy, I would advocate going back to the main principles of understanding how the deficit is calculated in the first place. This will give a more realistic view for trustees and sponsors helping them to make more effective decisions.”

I so agree that this is a good thing to do. I so want to understand why it is that these numbers are all over the place (including the numbers that come from the First Actuarial FABI index, but I find the numbers are making a fool of me too! Here are the October numbers


and here were the September numbers


I have read and re-read the source material that goes out with the PWC numbers and I am not much wiser about the “sides of the bed”

Even after reading the notes, I am not at all clear about the definition of funding


 These numbers don’t speak for themselves!

If I wasn’t able to understand them, how will non-pension folk people reading articles in the Guardian take these numbers at anything other than face value.

There are two things that are going wrong

  1. We have released information to the market which has been represented. The message seems to be too complex and the nuance of the message (these are the numbers- we’ll leave it to you to make sense of them) too subtle.
  2. We are not talking to our readers in a language that an everyday Guardian reader, can understand.

Part of this is the tone of the communication which is too dry, too lacking in emotion and too bloody boring. Where is our sense of humour?

I hope we will find a way to talk to the market for that is all important. Mark Scantlebury and I were talking yesterday morning about how bad pension people at making people laugh. Infact we think it is a virtue to make people bored so we write dull prose in a dull way.

Both Raj and my lot  that current methods of valuing pension liabilities aren’t properly understood. Clearly – with such huge variations in results – they’re not all fit for the same  purpose. We both come at this from the same place and it’s only the way we try to get our ideas across that differs.

First Actuarial and PWC are like the cowboy and the farmer in the musical – Oklahoma. We are not quite the same and we may make much of our differences, but we are both frontiersmen working under the same sky on the same plains. As the song goes “the farmer and the cowboy should be friends”.

Here is what Con Keating wrote to me when I asked his advice

Raj is one of the more reasonable people in this market. He certainly is not married to the status quo. I have read all three documents also and there is really no salvation for him there. All that said: Is it crazy that deficits go up and down like yo-yos – yes. But those are the standards in place. They are crazy and bear no resemblance to what is going on in a pension scheme, or for that matter its fund. My advice – buy him a good lunch – peace and reconciliation is the order of the day/week/month -another case of smoothing

There’s no point in deciding who’s a cowboy and who’s a farmer. The idea is that we should be friends.

I am going to buy Raj a lunch – I know what he likes – he likes Argentinian steaks, we should eat at Ranchos. I’m going to ask Raj for his hand in forgiving me my over- aggressive blog and I’m going to ask if First Actuarial can work with him to make sure trustees “go back to first principals”.

When people read this stuff they just turn off, which means the important, subtle and deep message we want people to get- is never heard. This is so important right now, because we have our new Pension Minister Richard Harrington commissioning a green paper on all this and what we say about valuations and deficits and funding needs to resonate with people like Richard – why by their own admission, are at ground zero in their technical understanding

It’s not what we’re saying, it’s what they’re hearing that matters. We need to get better at helping people like Richard hear what the numbers are really saying!

cowboy and cowgirl


If you want to read the source material behind PWC’s calculations, it is here







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 “It’s not what you’re saying, it’s what we’re hearing”. DB needs clearer messaging.

  1. Mike Otsuka says:

    We also need to communicate in a manner that sponsoring employers and pension scheme members will understand. I link here to my attempt to convey, via an analogy that a Guardian reader might find illuminating, the approach to the valuation of the USS pension scheme that First Actuarial has recommended. I would be interested in hearing whether you think this sort of analogy is helpful and also whether you think I’ve managed to convey, without too much oversimplification, the gist of First Actuarial’s approach: https://medium.com/@mikeotsuka/an-explanation-via-buy-to-let-analogy-of-first-actuarials-approach-to-the-valuation-of-the-uss-3eea79d41044#.w8ugw2owf

  2. henry tapper says:

    Thanks Mike

    The articles’s spot on and very helpful

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