A pension is a bleeding pension – pass me the aspirin!


After a night at my old college reminiscing with Huw Davies about rugby 40 years ago, I admit to having a slightly jaundiced view of the world this morning! (Huw played a few games for my college team when up at Cambridge).

But reading this response to my blog on giving people with SIPPs the chance to turn their pot into a pension I have gone from groggy to groaning! But it’s helpful to have comments which show how little common ground there can be in pensions.

I’m confused why you’d be in a SIPP, but operate it like a DC pension (which are all allocated similarly if you go with passive defaults), and then complain when the value goes up and down.

Let’s get our terminology in sync. SIPPs are DC pensions, they are of the same genus as personal pensions, group personal pensions , stakeholder pensions, they are all types of savings plans which promise a pension but deliver no such thing. SIPPs go up and down in value based on the investment valuation, just like any other kind of savings plan (including ISAs and General Accounts. I can understand why you are confused as some SIPPs are converted into workplace pensions (GSIPPs) which are then required to come under the rules governing workplace pensions (defaults , charge caps etc.). The point is that none of this matters very much other than to pension experts, the problem’s the same – there’s no pension – e.g. income for life with these DC plans – any of them!

You’re no worse off than almost everyone else who is now in DC.

Absolutely right, as far as the fundamental problem of getting paid a pension from a pot, we’re all in the same boat (and all need the same lifeboat.

Even if you self-invest in your SIPP, then I hope you’ll accept your choices can give good returns and bad returns.

Of course I’m with you , Dave C! I think you mean by “self-invest”, by-pass fund management and manage your assets directly. Of course this leads to a range of returns depending on how well you choose and transact.

If they’ve been mis-sold then that’s a problem. But what does that have to do with SIPPs?

SIPPs just happen to be – for the most part, independent of the workplace “non-workplace pensions” as the FCA clumsily call them. SIPPs aren’t generally to blame for the problems a lot of people have with having money invested in the markets. The problem I’m talking about, Dave C, is not market risk but the insurance risk of money running out before we do!

The miss-selling problem (e.g. people not realising they are investing in a SIPP is not really a problem. Generally people differentiate between savings and investments, investments go down as well as up, savings go up (but too slowly to keep place with inflation). See Video on this blog

CDC sounds too good to be true. If pensions can’t work as DB promises, or individual DC pots, how does bundling DC into combined pots make them work?

Let’s forget about CDC – it’s confusing the issue. What I’m talking about is a lifeboat fund for people who want greater certainty than they get from drawing money down from their pot, without the costs of buying an annuity which result in poor rates of income. Pensions can and do work as DB promises. The State Pension provides a defined benefit as do public sector pensions, millions of people in the UK are enjoying DB pensions guaranteed  by employers in the private sector. DB works around the world because it provides a pension – a lifetime income!

Shuffling and rearranging deckchairs to increase seating capacity? There are only so many chairs! And using more chairs up for regulatory and policy bottoms is likely to just take away more seats, than provide more,

Dave C, you’re better than this. The reason I have written all these blogs is not to give jobs to regulators and policy holders. It is to return people to a former state where, when you were offered a pension , you got a pension. The £80bn wealth transfer from DB pensions to SIPPs that occurred between 2016 and 2021 has given people pension pots they had no idea they could have had – “unimaginable wealth”. But these pots are not what is needed to pay a replacement income after a steel worker or postal worker stops working. What they need is a wage for life, paid to them as a pension.

So forgive me if I am a little testy with you Dave C, but it really is time that we started taking this problem a little bit more seriously.

Now where’s the aspirin to be found?

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 A pension is a bleeding pension – pass me the aspirin!

  1. John Mather says:

    Testy….Sometime is is worth taking the opposite side of the debate to find common ground let me have a go without being testy…

    Surely the main differentiator is in who takes the risk. In the DC case it is plain it is the member who has the risk.

    In DB the employer has the initial risk and the industry pretends that this is a Gold Plated scheme not to be questioned.

    However the risk is still with the member as the majority of companies were unable to deliver the promise so we have a zinc plated PPF. Is this not mis selling?

    Surely in DB the pension is paid out from the collective pot and anyone unfortunate enough to die early benefits his workmates at the expense of his family

    When interest rates are low the peculiar obsession with instant liquidity for a scheme that is designed to need cash decades ahead produces unusually generous transfer values. In Many cases if 100% of the members requested this at the same time the fund could not pay out.

    So legislation is introduced to frustrate transfer advice being given. I am not condoning the sale of high commission and dubious scams. but the thinking often falls short of the full analysis

  2. Dave C says:

    Henry, I value your blog and your moral position.

    I too would like the relative utopia of the post-war period to never end, and continue to a nirvana… the one I grew up with in the 80s, with evoking images of humanity living integrated tightly with nature, with moderated populations, investment in the distant future rather than worrying about next week or next month, or the next government election.
    Not worrying about how high we might be able to turn the thermostat up, because electricity would be too cheap to even bother metering.

    I won’t go too far into things, because I think this isn’t a technical matter but more a perspective matter.

    I’m willing to be objective about the future we face. We’ve over-spent, over-expanded, over-indebted, over-consumed… we’ve just had a great time and now the bill is due. Economic, ecological, social… and our children will be paying it.
    We could have spent the last 60 years building utopia, but we decided we’d all just live it up instead.

    Even our own government don’t act as examples of good behaviour. They convey the worst of individual self interest and greed to society when they should set an example.

    So individuals in things like DB, and if so inclined when offered a cash pot and the opportunity for more, will take it.

    As John notes above, one big thing is that to make DB (or CDC) work, those who live short lives ultimately pay for those who live longer lives.

    Right now, in SIPP, those people who abused their bodies and perhaps feel like they’ll only live 5 or 10 years in retirement will leave a big lump sum to their family. Un-taxed too.

    If they come back into the community fold, they won’t be rewarded, they’ll just subsidise the people who’ll live longer.

    How can we create a carrot that entices these people back to community provision, from SIPP, when greed and self-consideration took them away in the first place?

    Is society generally really in a position to step back to thinking about everyone else as much as themselves, while everything else is pushing them to think about themselves more and more?

    This is at a time where our governments on all sides are punishing us all financially.

    I just feel the message will be entirely lost.

    There is no free money, no spare deck-chairs. The only way forward is to get people to give up what excess they have for the benefit of others.

    Even I don’t want to do that in the current climate. The government aren’t encouraging me to be that kind of person by their behaviour and failure. They act in their own best interests, and so will I.

    This isn’t to say I want Corbyn running the show either.

    There is a way forward, it just requires good people to make good decisions. None of our politicians are capable or willing.

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