The pension must go on


As we all work in our individual way from our individual workplaces, it’s hard to see the big picture – we see plenty of trees but not the wood.

Pensions are not about us but about the people who get a wage in retirement from their endeavours when they worked. Whether the entitlement to that pension is through the social security system , through DB accrual or through defined contributions, the pension must go on.


Pension and Payroll administration

The view of pensions if you are an administrator will be focussing over the next few days on the payment and receipt of Defined Contributions from payrolls run with a proportion of the staff furloughed, some redundant and many senior employees taking pay cuts. If you want to see how complex the job of payroll and pension administration is at the moment , follow @KateUpcraft and read her weekly updates.

The work of payroll and reward in maintaining the auto-enrolment system of workplace pensions is critical. Similarly the payment of pensions , the maintenance of accurate record keeping and the timely investment of monies received are vital to future confidence in our pension system. Payroll and Pension administrators are our nurses.

These are the people in the front-line when it comes to detecting and stopping scams.

There may be more glamorous areas of financial services, but at this point the work of payroll and pension administration is of #1 importance. If we can come out of this crisis without major administrative issues, it will be testament to the hard work of our administrators, the PMI, PASA, CIPP, CIPD and PLSA.

Investment management

The capacity of asset managers to tactically deploy assets to avoid the impact of Covid-19. But tactical plays are dangerous when the value of a barrel of oil can be measured by the cost of storing it (not the utility of the oil.

Yesterday oil dropped to -$40 per barrel. That is not a typo – oil was priced at NEGATIVE $40.  On Friday it was priced at +$27 a barrel.

These mad price swings happen because of derivatives, financial instruments that trade in opaque market , with little oversight, and which regulators have permitted to become a systemic problem.

Yesterday , oil traders who owned derivatives woke up to the fact that they’d have to take delivery of the physical oil they owned. Thousands of barrels.

If this could happen to oil, it can happen to any commodity, it could even happen to bonds.

Whereas pension administration is about delivering people’s wages in retirement, investment management has become a complex game of chicken, played with other people’s money.

The simple business of investing for people’s futures is what pensions are about. Investment management that sticks to that principle and avoids this game of chicken will come out of this crisis the stronger. I fear that many of the more complex structures that underpin our retirement savings are creaking.

The certainty of a pension

It is understandable that – faced with an investment market that can see the price of oil swing from +$27 to -$40 in a day, that people are going to put their trust in others to make sure their pension is paid.

That trust is put in pension providers, whether governed by trusts or IGCs , regulated by tPR or FCA. People are trusting the financial system to see them through and for there to be a recovery over time that will make sure their pensions will be paid.

It is payroll and pension administrators who are key to this. Though we have seen some wobbles, savers have been able to call in about their pensions , get reassurance and see their pensions paid. Most advisers have stayed open, supported their clients and not furloughed support. Indeed , the IGCs and provider executives I have spoken with report that administration and member support has often switched to home work showing that – when put to the test – providers can be a lot more resourceful than I (or they) thought!

I live and work in the City of London, I can see from my window the few essential workers who still have to go to work and the enormous spaces of unused offices – where nothing is happening.

And yet we see markets priced each morning, we see the value of our savings tick up and down through our online portals. The dam is holding.

There is certainty in pensions and – when we come out of this – we will value our pensions the more – for just that.




About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, age wage, auto-enrolment, dc pensions, de-risking, Liability Driven Investment, Pension Freedoms, pensions and tagged , , , , , , , . Bookmark the permalink.

Leave a Reply