£400bn reasons for better practice. The very odd world of “not- workplace-pensions”.

£400,000,000,000 is a lot of money. It’s the amount that sits in “not workplace pensions”.

“Not workplace” is what we call that great hinterland of individual pension pots that are labelled stakeholder pensions, personal pensions or self invested personal pensions.

Now the FCA are turning their sites on these forgotten policies. Discussion Paper DP18/1 “Effective completion in non- workplace pensions” aims to shine a light on what’s going on with our private savings. This is what the OECD is called the third pillar, and it’s a very odd pillar indeed!

The paper starts with a review of where this money sits , or at least what the “value chain looks like.

value chain

Anyone familiar with my recent blogs will recognise the bottom row. Far from creating value, the RDR has  spread opportunities for fee charging. Ordinary people are finding themselves signing up to discretionary fund management agreements without proper understanding of who is managing their money and how much it is costing them.

Where the individual personal pension was a licence to take commission, the new SIPP is a licence to take fees, while commission was charged against contributions, fees are charged to the fund.

Meanwhile, the paper points us to the world of workplace, an idealised world of large schemes where the employer picks up the majority of the fees.

value chain 2

Not that black and white

To suppose that workplace is a nirvana of subsidised services while non-workplace a barren wasteland is entirely wrong.  Figure 4 (above) is taken from a survey of 144 large DC schemes run by members of the PLSA. These schemes are as gold-plated as DC plans get and are generally aspiring to PLSA’s Pension Quality Mark. But the generality of workplace pension arrangements are paid for almost entirely by the members, the employer picking up the cost of auto-enrolment compliance.

Meanwhile , a new breed of streamlined SIPPS such as those run by Pension Bee, Evestor and the forward thinking insurers such as Royal London, members are being offered the kind of pension most workplace pension providers can only marvel at.

This new breed of SIPP is setting new standards in terms of customer service, embracing our new world of digital interfaces, offering instant access through our phones to services that still take the workplace pensions days to provide.


It is the best and worst of worlds

So just as the shift from personal pensions to SIPPs has given the opportunity for fee gouging, it has spawned a new kind of competition. The PensionBee Robin Hood index is an example. Not only does it shine a light on bad practice, but it enables progressive SIPP providers to put pressure on workplace pension providers such as NEST and Aegon, who are conspicuously failing customers, especially when customers try taking money away.

It is not just Pension Bee that has suffered from the bullying culture of the “pensions industry, regular readers of this blog will find that some of the blogs on what I consider SIPP malpractice are missing, they can draw their own conclusions.

But the old world of legal threats and deliberately obstructive transfer practices is not one that sits well where social media shines a light. The transparency agenda is made possible because organisations like Pensions Bee are no longer dependent on Aegon and NEST. RDR has its successes and the new streamlined SIPPs are as a much a pointer to the future as the activities of some advisers in Port Talbot are a pointer to the past.

£400bn is a lot of money.

It is high time that the FCA got to grips with “not workplace pensions”. They represent the best and worst of what is going on today.

Reading  Discussion Paper DP18/1 “Effective completion in non- workplace pensions”, makes me want to respond to it,  It is a sensible document that is in the interest of FAMRs population. The FCA are reaching out to the trustees of occupational pensions and it’s important that those trustees reach out to them.

£400bn is about 40% of the value of the funded part of Defined Benefit pensions, it is a huge amount of this nation’s wealth. Just what will happen to this money is open to conjecture, though it has received pension tax-relief, it is unlikely to be paid as a pension.

Some of this money should properly be considered wealth, the majority of it is pension saving from ordinary people who are neither wealthy or desirous of freedoms.

This discussion paper is nicely time to coincide with the Work and Pension Select Committee’s investigation into the Pension Freedoms and subsequent inquiry into CDC. Let’s hope that these various discussions can be brought together for the common good!






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 £400bn reasons for better practice. The very odd world of “not- workplace-pensions”.

  1. Mark Meldon says:

    Henry, the world of pre-2001 personal pensions (and FSAVC/EPP) is, as you say, quite odd. I spend a lot of time looking at old contracts that pass across my desk. Back in the early 1990s, there were over 100 providers of “insured” PPPs, nearly all of which have long gone and are now part of companies like ReAssure.

    Setting aside investment performance for the moment, it is the arcane charging structures that can trip up advisers and consumers. Whilst many of these old PPPs are clearly bad value for money, having been designed with much earlier IT infrastructure, that isn’t always the case. These PPPs deserve careful analysis. One simple example will suffice.

    Back in 1992, I recommended a Sun Life PPP to an electrician and, yes, a commission was payable to my firm for doing so. The plan used capital and accumulation units. This plan has been kept up, and the contributions increased (substantially) over the last 26 years and we have now just passed selected retirement age. The electrician will probably go on for another 5 years or so and we have amended the SRA accordingly.

    It’s not a big fund – £83,000 from memory – but has just benefitted from a “loyalty bonus”. The bonus, which is really a refund of amc’s came to just over £8,000, which is rather nice. The investment returns have been OK, too. Sure, we might have “done better” by switching provider, but that’s not a given.

    Look hard and long at these old plans!

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