“Pension experts” are most of the problem.

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Some time has passed since the publication of the Joint Expert panel report on the funding of the University Superannuation Scheme. I haven’t commented and won’t comment while negotiations are going on.

The thread from Jo Cumbo that is published below on twitter is interesting (at least to me)

I’d like to see the JEP report as part of a wider debate about how we view collective schemes. This debate necessarily includes the new CDC arrangements , starting with Royal Mail and continuing (hopefully) with opportunities for smaller employers and even individuals with DC pots.

To create the space for the USS to have its debate, or Royal Mail for that matter, there has had to be intermediation by the unions – UCU and CWU respectively. As most people know, First Actuarial – my firm – are advising both unions. This is one of the reasons I don’t want to bugger up negotiations by sticking my oar in!

That the unions have been so effective, is partly due to the advice given, and my colleagues deserve praise (which they’re getting). But it’s much more down to the membership of the unions and the leadership of the unions.

They have created the space for the debate to happen. All this from people who are anything but “pension experts”.

Taking pensions away from pension experts

For too long, people have been told that their pensions are unaffordable. Only today i read a report telling us that those in good quality Defined Benefit pension schemes are getting three times the benefits of those getting a defined contribution. In a world the right way up, those with DC schemes should be demanding defined benefits.

But we live in a world of pension experts who believe that the way to sort out the problem is to take benefits away from those who enjoy them and dumb them down  to the lowest common denominator. We are told that we must de-risk because we cannot afford people to retire on the right amount. In a world the right way up , we would re- prioritise the use of corporate profits to ensure that people retired on the right amount – that’s what pensions governance should be about.

Royal Mail and USS are disputes over pay. Both are primarily about deferred pay. In a world the right way up, the agreements reached by Royal Mail and (hopefully) at the Universities, will see hundreds of thousands of people continue to accrue good pensions.

Instead of celebrating this as “good news”, the pension experts throw up their arms in horror. We need to take pensions away from pension experts and give them back to ordinary people.

Let’s recognise the true experts.

We have an extraordinary pension system which is underpinned by the Pension Protection Fund. This week we heard of two Regulatory Apportionment Arrangements that have gone wrong, because they avoided the PPF.

The first is Kodak, which after spending £15m in advisory fees to stay out of the PPF is tipping back members into the PPF because Alaris (the remains of Kodak in the UK isn’t working well enough. The question the Work and Pensions Select Committee is asking, is was the cost of keeping Kodak out of the PPF worth it?

The second is BSPS, where things are rather different. Tata is thriving in a way that Alraris never did, but we now know that 8100 people left BSPS and “New BSPS” since their RAA was announced.

The experts who devise the RAAs create side-effects that aren’t welcome. I wonder whether Alaris might not be a lot stronger if Kodak had put its scheme into the PPF. I wonder if most of those 8100 cash-rich former BSPS members, might not have been better off having pensions paid from the PPF.

We have unwittingly re-branded the PPF as a monster – to be avoided at all costs. But nothing could be further from the truth. The PPF is a great thing – a fund that is moving fast to self-sufficiency. Sadly, the people who set up and run the PPF are not counted as experts. Not for the first time, I am with John Ralfe, in thinking that the super-complex RAAs are more trouble than they are worth.

I am no pensions expert

Today , I am quoted as a pensions expert in the Times. I am no such thing.  I am quoted saying this to a couple who are thinking of selling their rights to a really good pension for life for a mess of pottage (well £260,000).  You don’t have to be an expert to work out where I’m coming from.

The experts

Henry Tapper of First Actuarial, a pension company
“Mr Hayden should think about the Hewlett-Packard benefit that he’s giving up. If he had £260,000 today and wanted to buy a guaranteed pension, Aviva would quote him a level pension of £10,316. But if he wanted that pension to be paid to his wife and for the income to be linked to inflation, the Aviva pension would fall to £5,270. Occupational pensions protect you and your spouse from running out of pension if you live longer than anticipated and they give you protection against inflation.

“He would be giving up more than a £13,000 pension at 60, he would be giving up protection that may be worth as much again.

“Mr Hayden works in a low-risk job. He and his wife should be living for 30 years or more in retirement. So that £260,000 isn’t such great compensation for what he’d give up if he took the money. What’s more, to take the transfer he’ll have to find an independent financial adviser. This kind of advice isn’t cheap. Mr Hayden should expect to pay 2 per cent of the transferred amount [more than £5,000] for the work. All in all, taking the transfer looks a lot more risky from where I’m sitting than it may do to Mr Hayden.”

I’m glad to say that the other “experts” (including Steve Webb) agree.

Pensions Experts are the ruin of pensions. They believe that everything should be cashed-out, de-risked – all liabilities shifted to the people who are least able to manage them.

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Motto for pension experts





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 “Pension experts” are most of the problem.

  1. Dr Robin Rowles says:

    I’m not a pensions expert either, having only been a trustee for 10 years of one of the UK’s largest pension schemes, but some of what “pensions experts” tell us about types of schemes, freedoms, and investment vehicles fills me with horror! (and dread for the future)

  2. Bob Compton says:

    Henry, you piece states “”Pension Experts” are most of the problem””, that risks alienating those in the pensions industry who like you are trying to raise standards. There are Pension Professionals in the industry who will look at a clients best interest, and there are those who are paid to do a job, where generating income keeps them in a job. The issue on advice is one of conflicts of interest, who has most to gain out of transaction proposed, if it is the Client or the Client and the adviser that should be fine, but not fine if it is the Adviser.

    Having been in the Pensions Industry for over 40 years, the one thing that is constant is change! Those that are advised to switch out of good DB pensions should ask how long the adviser has been in the current role, and where the adviser expects to be in 5 years time. So who will provide the ongoing advice and support needed to manage a drawdown pot, once the adviser has moved on? As people get older and are living longer it is natural their faculties that may be sharp in their 60’s to decline in their later years. Who will be managing the pots of 90 year olds and centurions.
    It’s going to be a scammers playground!

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