How many times must I tell you?


That’s how many times people needed to be told something according to the presentation of a very bright lady who worked at Which and spoke at the Quietroom communications day two weeks ago.

I am in the midst of an interesting discussion that looks retrospectively at the promises made to people in the 60s, 70s and 80s about their pensions. These pensions were generally not guaranteed but were offered subject to the trustees’ best endeavours. If the trustees didn’t have the money, the pension wouldn’t be paid (in full or at all).

I don’t know how many pensions didn’t get paid to the promise- back then. These schemes were young and cash flow positive and were aggressively invested in a bull market. There was more talk of surpluses than deficits.

The question I’d like to have answered was whether people were told their pensions weren’t guaranteed, not once but 26 times.

For instance…

If you here something often enough it becomes a cliché, but at least you know the cliché.

Mind the gap….

Stand clear of the closing doors please….

The price of Units can go down as well as up.

Did people get told their pension wasn’t guaranteed to that extent?

I suspect not, which is why Norma Cohen is right to say that when the proverbial hit the fan post millennium, most people were up in arms to lose a penny of what they saw as a guarantee.

And it’s not just pensions. I used to work for Eagle Star who offered a Guaranteed Endowment on a “non-profits” bases, it guaranteed to pay a cash sum if you lived or died, provided you paid all the premiums. The trouble was it was three times as expensive as a low-cost endowment that only guaranteed a proportion of the expected pay-out. There were even unit linked endowments that were cheaper still and guaranteed nothing.

Full cost- low cost or no guarantees at all?

If you want the equivalent of the full non-profit endowment, then set up a DB plan and invest in gilts. To do the job properly you need to be setting aside 50% of the pay of the people you’re pensioning.

If you want a plan with no guarantees at all, choose a DC plan and pay into it what you like, your staff will get the contributions and plus or minus what  the market gives them as a return.

You get what you pay for in life, many people got a better pay-out pound for pound from unit linked and with-profits endowments but that didn’t stop them suing insurers because the sum needed to pay off the mortgage didn’t materialise. I guess no-one told them that paying half the full price meant there was a risk.

The proper argument for selling a 25 year with-profits or unit-linked  endowment is that – released from its guarantees – your savings should grow faster over time on a with-profits basis. Indeed they did, but not fast enough to meet the tough projections set by the actuaries. While many low cost and unit linked endowments paid out “pound in for pound out” more than the guaranteed plan, people who hadn’t been told 26 times – complained and had their complaints upheld.

What price certainty?

Right now we have an annuity, which is a full cost endowment in reverse. We also have with profits and unit-linked DC plans and people now know that they don’t want any of them. Most people – it would seem – would rather have cash in the bank.

Norma Cohen is right to rail at the culture that passed off unguaranteed pensions as guaranteed. But does that make unguaranteed pensions wrong?

I would say “no”. Provided you can tell people 26 times that their pension scheme is not guaranteed, providing the equivalent of a unit-linked pension is a good idea.

Thankfully, we have people on twitter who will tell us things 26 times. I think John Ralfe may have told me I’m an idiot – a thousand times now! He’s got the right communication strategy!


There are also people like John Kiff in the world!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions. Bookmark the permalink.

2 Responses to How many times must I tell you?

  1. Adrian Boulding says:

    Many moons ago I used to work on targeted final salary schemes. They were structured as a DC scheme but with the aspiration that with a following wind they would pay a final salary benefit.

    And when the wind was behind them, they were fabulous.

    But when the wind turned, they brought only problems and ill feeling. The member thought he was getting a final salary benefit and became upset if this wasn’t forthcoming at retirement. The employer thought he was paying a fixed contribution and became upset when he discovered that he had to choose between paying more in and disappointing his members.

    So I’m not sure the number 26 helps when you have mixed messages as the human brain tends to filter the messages to hear the ones it wants to hear!


    • henry tapper says:

      I normally agree with you on behavioural matters. But I think it’s wrong to dumb our pensions system down so that all risk falls on the member – because we’re worried about the risks from members!

Leave a Reply