From Denham to Sier – a 1% world!


You know how sometimes a little fact gets stuck in your head for no apparent reason?

Back in 1998, I was reading an article by the then Pensions Minister John Denham. He stated that if we could reduce the annual management costs of pensions from 2% to 1% we could improve outcomes in retirement by 27%. Maybe he didn’t say “outcomes”, that word is a recent interpolation.

I think he may have pointed out that 27% more in the pension pot was like a 27% pay rise for the rest of your life, or at least a 27% better pension. Anyway this 27% number stuck in my brain and it’s still there. In fact it is the key number when I ask myself why I’m bothering with pension governance.

Actually, we are getting close to a 1% world, stakeholder pensions thought they’d got us there, but we bounced back to 1.5% and – if you counted in all the hidden costs, we may have been buying some stakeholder product at close to 2%pa.

The cap on workplace pensions meant that so long as you stuck with the default, you paid no more than 0.75%  by way of an annual management charge but of course this did not include all the hidden costs within the fund which might still bounce you back above 1%. And of course your boss might be hit with a load of direct and indirect fees meaning the total cost of your pension was a lot higher than what you were paying.

I did not think we would get to a position where we really knew what we were paying for workplace pensions -until yesterday.

Chris Sier

Dr Chris Sier has been appointed by the FCA to chair its working group on disclosure of costs and charges for institutional investors.

If that seems complicated, it isn’t. Chris Sier is a wonderfully uncomplicated former policeman who has a big brain and a moral compass set firmly in the direction of “good”.

He is someone who is motivated by good – he is good – Dr Chris Sier is a good man.

Which means that we will see good things coming out of the working group. We will get good data to work with when analysing the value of workplace pensions, we will get proper numbers on the costs of managing our money and we will be able to make value for money assessments on workplace pensions – at last!

That Chris was asked and accepted this task is a good thing and I am full of hope that at last I will be able to think of 1% pensions as a reality.

For Chris to succeed we are going to have to tear down all the bad things that stand in the way of knowing what we are getting. We are going to have to tear down the Non-Disclosure-Agreements and the anti-benchmarking clauses and all the nonsense that comes from those who say we over-value price comparison.

It takes someone as big and honest and good as Dr Chris Sier to make this happen. Until I heard he had the job, I did not believe it would happen – but I am finally believing that the 1% world that John Denham talked of 20 years ago – is going to happen!

And with it – we will carry on restoring confidence in pensions.


A 1% world with 27% better pensions

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to From Denham to Sier – a 1% world!

  1. Adrian Boulding says:

    Well said Henry!

    I remember 1998 too and getting kicked by other insurers for advocating the 1% Stakeholder charge cap!


  2. Con Keating says:

    I don’t know what Chris Sier’s brief from the FCA is, but I strongly suspect that it is limited to the technicalities of cost and fee disclosure. I do think that will lead to lower overall costs – transparency as a disinfectant and all that – but in and of itself it does not have to.

  3. Phil Castle says:

    Based on Henry’s belief in Dr Sier, I think it essential to get behind him and encourage him. This means getting a positive message out in the trade press and not allowing the FCA or anyone else to spin it for ends other than what Henry (rightly so) would like to see.

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