B&CE bas re-branded to People’s Partnership moving the live company on from its industrial heritage towards it being a master trust that does a few other things as well.

In recent years , the “other things as well” have reduced. Time was when B&CE ran the largest stakeholder pension , previously they had been the market leader for holiday pay schemes. B&CE tried (and failed) to get into the healthcare market. The one thing that People’s partnership does well is pensions.

And it does run a very sensible retirement savings scheme for 6 million UK savers who await the appearance of the “pension”.

Clearly, People’s Pension are a little nervous about the “pension” word – “partnership” also takes the “p” but doesn’t promise an income for life at the end of the day.

Phil Brown, who is the policy guy at People’s Partnership is currently being deliberately boring about pensions , something that’s understandable as having successfully made the land grab of most of the value from auto-enrolment , People’s are probably best off trying to hang on to as much of the money its built up as it can, which means deferring drawdown, annuities and the cashing out of pots.

Personally, I think this is an unsustainable strategy and I suspect that Phil Brown agrees. Here he is on what’s going on..

Every year, around 600,000 pensions are accessed for the first time. These new retirees begin the complex process of decumulation – getting rid of the assets they’ve built up in their pension pots to maintain their standard of living. But surprisingly, before selecting how to withdraw their pension, less than half of retirees seek professional advice.^[i]

The [1] refers to an equally unchallenging report from the ABI which purports to “future proof the pension freedoms” and support “customer decisions about pension withdrawals”.

I feel a Greta Thunberg moment coming on – “blah blah blah”.  Phil Brown is not a boring man – I suspect he sees beyond the end of the ABI’s nose.

Time for some pensions for the people?

I hope that People’s Partnership will do some proper thinking on this. Like Nest , they will be responsible for a very large number of people who have never had to take a decision about pensions and have found themselves with a pension pot almost by accident.

The sums involved aren’t massive, The average pension pot for People’s Pension at retirement is likely to be well below the £37,600 quoted by the Telegraph for UK savers as a whole. Adrian Boulding has a rule of thumb that suggests that any pot less than £10k will get cashed out (suggesting the value of consolidating is that it leads to pensions rather than big bank balances).

In a recent article quoted on this blog, Eversheds’ Mark Johnson suggests that in future , attempts to turn pots to pensions , should be limited to a minimum pot size or a “scale threshold” to protect providers from unprofitable business.

So the outlook for many People’s customers doesn’t look like People’s Pensions at all.

Time to get invested?

If there is to be a shift from the cancel culture that persists around small pots, someone at People’s Pension is going to need to find a way to get pots invested to and through retirement and get the pots paying pensions.

This has long been the plan for CDC , with former Minister, Guy Opperman repeatedly talking of getting CDC master trusts into play.

I’m not so sure. Willis Towers Watson is promoting the idea of a CDC master trust. This would please the DWP CDC regulation team and those at TPR looking a little lonely with a CDC funding code concerned with just one scheme. But I don’t see many commercial master trusts forking out big fees to apply and report on a CDC scheme of their own.

The alternative is to manage CDC within an investment fund managed like an annuity without the guarantees (and hence the need for an insurance company). This approach would suit People’s much better than turning itself into a CDC scheme as it would only require it to add an extra fund option to its current choice architecture.

Not only has People’s Pension not shown an aptitude to managing pensions but it hasn’t shown much interest in offering investment management. It historically handed all investments to L&G.  The People’s Pension now outsources its investment management to State Street.

It has never shown too much interest in promoting itself as an investor of its 6m member’s money. While it employed a high-profile CIO in Nico Aspinall for a bit, he pushed off and we haven’t heard much from them about investment since.

What we really need from the People’s  Partnership is more about risk sharing, which is the essence of the mutuality they hold so dear. If they are to make a fist of that, they should be thinking a little about the excellent ideas in Michael Jones recent paper

The government should consider whether CDC in decumulation adoptsa “consent/opt-in” model where schemes signpost the member to a preferred CDC solution and deploys the path of least resistance – this builds on some of the concepts proposed by the PLSA in its final recommendations for DC decumulation and utilises inertia, which underpins the success of auto-enrolment.

In short, rather than running People’s Pension as it does today , it should eschew becoming a CCD scheme and give its members a CDC pension as an option, which like everything else in its proposition, would offer an option to opt-out.