The risks of partial disclosure

Look at this photo.


Partial 2

A partial picture

You might have thought that Ruston Smith had won a CDC award for Tesco. Certainly not the case!

Now look at the full picture!


The full picture

Mark Scantlebury has won an award for Quietroom, partly for his work with Ruston on simplifying pension statements.

The full picture tells a different story!

Of course the full picture is not quite what Ruston and Quietroom’s pension illustration r gave us. Some people (not Ruston and Quietroom) , thought it was better that “ordinary people” weren’t told how much had been taken out of their pension for management fees.

Various reasons have been given for this

  1. It was too hard for insurers and pension administrators to calculate
  2. It would tarnish the image of DC pensions
  3. It would reduce savings.

In my view – all three arguments are tosh. If you tell people a lot of stuff about value – and nothing about cost, they end up walking away, feeling they’re being sold an idea without a price. Would Tesco display an item without the price?

Low income tax relief group call for an end to the net pay tax anomaly.

Here’s a photo of a meeting held in the House of Lords yesterday. The reason everyone’s looking concerned was that it had reached the toughest point. Brains were engaged, ears opened and our mental faculties extended to the max!

Partial 3

The reason? We were debating how hard we should push the questions posed by the net pay anomaly.

The arguments for full public exposure are obvious to those who know the subject.

Including those in DB (and in public DB especially) over 1m are not getting the Government saving incentive promised them on their contributions.

  • The impact on individuals is around £34 this year rising to £64 next year and more if the lower earnings threshold for tax  further diverges from the lower earnings threshold for auto-enrolment
  • Two thirds of those effected are women as women tend to take part time jobs and often earn less than £12,500 in a year.
  • The LITRC and NOW pensions have come up with a solution to fix the problem through pay-coding adjustments. Read about it here.

As Ros Altmann said, the issue is one of social justice; treating the low paid fairly, treating women fairly – keeping the promise of 3-4-1. The red is the Government promise to meet the balance of the cost of auto-enrolment after the employer had paid three and the employee three.

Forcing the employee to pay that “1” rather than the employee getting the money paid into their pot on their behalf (what happens at NEST , Peoples and with contract based plans) means that HMRC wins and ordinary people lose.

The issue that the people in the photo were struggling with was precisely the issue that forced those producing the simplified illustration to remove the line about charges

  1. Those running net pay schemes say it’s too hard to move to relief at source
  2. Full disclosure of the problem would tarnish auto-enrolment
  3. Full disclosure would reduce savings.

Why I fundamentally disagree with partial disclosure

As can be proved by the photos at the top of the picture, giving people half the picture gives people the wrong impression. When it later emerges that they’ve only been told half the story – shown half the photo – people feel conned – especially if they have been!

Secondly, it is a matter of fact that pensions cost manage to money, leaving people under the impression that they don’t is the opposite of financial education – it’s deliberately disempowering people from engaging with what they are doing. Disempower people and you can expect people to be led wherever you want them to be. This is a scammers charter.

Allowing the net-pay anomaly to run on and on simply makes the matter worse. It’s what we did for years with GMP equalisation. Now the bill for GMP equalisation is going to be horrid, not because there’s a lot of equalisation to be done – but because so much back testing needs to go on for so long.

With the net-pay anomaly, the situation is worse. When the million + people who’ve not been getting their “1” find out, then the impact on pensions confidence will be greater and the bill to put things right will be greater too.

If you want WASPI type issues, sweep the problem under the carpet – leave it to the next generation to sort out.

Why I will continue to tell it as I see it.

A tiny fraction of the population read this blog. Compared to the broadcast media and the daily papers, this blog is irrelevant. It’s relevance is that it feeds the stories that the broadcast media and daily papers publish.

Good journalists read blogs like mine because they contain the germs of stories that they can rewrite better. I’m not cross when they do – I’m delighted. I’m cross when the popular press and broadcasters don’t listen or don’t want to listen.

Thankfully we have a free press that publishes articles that criticise Government as well as praise it.

We all know that saving for retirement is a good thing and that auto-enrolment is a great way of getting people to save for retirement.

We all know that annual pension statements – especially the simple one that Ruston Smith and Quietroom have produced are good.

We all know that pensions cost money and that costs vary (as does value). Pretending that all pensions are the same is not good. The public know that some pensions do better than others – some cost more than others – the public are not stupid and if we treat them like they were – they will turn away from us.

We all know that a promise is a promise. If you promise that you will pay 1% into an auto-enrolled workplace pension  and don’t then it is you that have broken the promise.

It is not good enough for the Treasury to blame the DWP

It is not good enough for the FCA to blame TPR

If is not good enough for TPR to blame employers

It is not good enough for everyone to blame the net pay pension administrators who cannot change their systems.

If you make a promise to pay a 1% incentive to everyone, it is up to you to make sure that promise is met.  Ultimately it was the Treasury who made that promise – via HMRC.

This is HMRC’s gift and it is a gift that is not being given.

Because of Scottish Taxation changes – the bonnet is up; now is the time for HMRC to work out the annual adjustments to people’s tax-codes and ensure that the 1% incentive is given to them through pay. This is a workplace problem that should be sorted out through the Government’s workplace taxation system – PAYE – using REAL TIME INFORMATION.

While it is about it, HMRC should look to re-code those who are higher rate tax-payers, not getting a tax-assessment form and missing out on Higher rate tax relief when paying by Relief at Source (RAS).

Full disclosure for all!

As for the disclosure of cost and charges information on pensions illustration, the matter is far from over. Look forward to hearing more on this issue on these pages!

All pictures deserve to be published in full – especially pension pictures!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in #WASPI, accountants, actuaries, advice gap, pensions and tagged , , , , , , . Bookmark the permalink.

2 Responses to The risks of partial disclosure

  1. kate upcraft says:

    if you want an example of pension issues coming back to haunt you, you only have to look at my Mum and thousands of others like her. She had me in 1963 and was ‘advised’ by government that ‘you won’t work again as you’ll be a housewife now and your husband will provide a pension for you, but if you take a ‘little’ job just elect to pay 5.85% NI’. She did come a housewife but also took a lot of jobs over time to make ends meet as well as bring up two children whilst my dad worked as a civil servant. She then realised when she reached state pension age she had to wait until Dad did 4 years later to get anything. Her pension was so small it was paid annually to her. When she died 3 years ago I informed DWP, who said Dad would get a tax-free bereavement grant as there would probably be no inherited pension. They phoned back an hour later after I’d given Dad the semi-good news about funeral expenses and the grant, to say there was inherited pension so no bereavement grant – the inherited pension was 16p a week for him. I told him he needed to stick around a long time to make the most of that 16p! He has done just that as he had open heart surgery in August aged 85 and is doing remarkably thank goodness. Pensions whether they are state or occupational are a dark art to many people so it’s beholden on government to make them fair and transparent.

  2. henry tapper says:

    That’s an amazing story Kate. Thanks for sharing

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