Talks between the Friends of CDC and the Financial Scientologists broke down last night in merriment.

Actually, you are just flat out wrong. But you have a good sense of humor about it.

— Jeffrey Brown (@IlliniBizDean) July 21, 2018

There were a number of misunderstandings

Several leading US experts have devoted time to helping you understand, and you have the gall to call it “willy-waving “

— John Ralfe (@JohnRalfe1) July 21, 2018

And it’s true that Malvolio himself did not see the funny side

Several leading US experts have devoted time to helping you understand, and you have the gall to call it “willy-waving “

— John Ralfe (@JohnRalfe1) July 21, 2018

But I hope I am right when asserting a common desire to do the right thing by those who rely on pensions.

Time will tell Jeffrey! My lot and your lot don’t agree in theory but we probably have the same goals in practice! For the record – it’s “willy- waggling” rather than “waving”.

— Pension Plowman (@henryhtapper) July 22, 2018

Back in the real world

Over the weekend we read in the Times about Peter Lord who worked for Rolls-Royce for 27 years accumulating a final salary pension which he decided to cash in and invest last year. He set up a SIPP with the £196,000 transfer value on the advice of an IFA who charged him £7483 as a contingent fee. Despite being invested in the market, Peter’s pension is now worth £180,000 – the only withdrawals being to the many fee extractors engaged in managing Peter’s money. Peter has seen no pension.

When Peter’s family asked about what had gone on , Peter could not tell them. He had forgotten. Peter suffers from short-term memory loss after suffering a brain injury as a child. To my mind, this is the story of a vulnerable person who quite clearly doesn’t know what is going on and should now be enjoying a wage for life courtesy of the Rolls-Royce pension scheme.

Financial Economics, from my limited understanding of it, moves schemes like Rolls Royce from equities to gilts and discount rates from 3.5+ to 1.4%. This makes CETVs attractive to Peter Lord and his advisors. The financial economics of having a SIPP with £200,000 appeared better than staying in a scheme which the adviser warned was of the same type as that managed by Robert Maxwell and BHS,

In the real world, financial economics are undermining the social cohesion of our retirement system. Whether in Derby or Port Talbot, Halifax or Dagenham, we are seeing ordinary people with no knowledge of the pension scheme being bamboozled out of good quality pension schemes offering a wage for life, in favour of SIPPS that invest through DFMs in fund of funds that after full extraction – invest in assets about which the “self-invested” policyholder knows nothing.

The destructive force of abstract economics.

The reason we built up over a trillion pounds of assets in pensions was to back the promises to pay pensions to millions of people. In less than a generation, the impact of mark to market accounting has destroyed the trust between employers and trustees and trustees and members so that last year more than £36bn was voluntarily cashed-out , much by people with little understanding of what was going on.

It seems that the social impact of what the financial economists are doing is of no interest to them, they simply decree that those who are trying to help keep order, are “flat wrong”.

I don’t just blame the Modiglianis and the Millets and Exley, Mehta and Smith and all the other theoreticians quoted at me yesterday. I blame those that follow the dictats of financial economics to the exclusion of common sense – blind to the social consequences of where the theory leads them.

Such destruction has been meted on private sector DB plans in the UK, that it is unlikely we will ever see their likes again. The primary reason for their demise was of course the guarantees they were forced to give, which turned best endeavours into full promises.

Attempts to restore open collective schemes in the UK are now being objected to by the financial economists who screwed up DB. Now they are arguing I cannot opine on them unless I read their books. I would rather stick needles in my eyes than read a book on option theory.

We don’t need these financial bullies.

Once again , we are beset by experts;  people who think they know best because they use the longest words and the most complicated utility functions. But experts screw up like everyone else – see 2008.

Common sense tells us that we need a way of converting all this money we are saving into a wage for the rest of our lives; common sense tells us that we can’t all be our own CIOs or even afford our own advisers. We need to do things collectively and rely on each other to bring down costs and insure against freak happenings like us living to 110.

The financial bullies will tell you that financial economics says “no”. They will throw the book at you  – in my case they are throwing their whole freakin’ library!

Resist – live is for living. Debt does not beat equity, it’s better to own and produce than to lend and opine. Mark to Market has no place in open collective pension schemes and these schemes should be talked up and not talked down (as the product of a Green or Maxwell).

We need people to stand up to the bullies and not be shouted down.

Time will tell Jeffrey! My lot and your lot don’t agree in theory but we probably have the same goals in practice! For the record – it’s “willy- waggling” rather than “waving”.

— Pension Plowman (@henryhtapper) July 22, 2018