We need value for our money not “Retirement Roulette”


Stephanie Hawthorne has hit the nail on the head in her article today in the Mail’s this is Money section

Are YOU at risk of missing out on thousands as pension plans stake your cash on a game of… RETIREMENT ROULETTE

People are reading pension statements that show returns last year averaging MINUS 8.1%.

What is more, the people who have suffered most are those closest to retirement who have been “life styled” into low risk funds.

They have lost on the wheel of Retirement Roulette with no idea that they were even at the table. Somebody else was playing their chips, the ball fell on the red, they were on the black.

Stephanie highlights three key messages

  • Around 11m pay into workplace pension for good standard of living in later years 
  • Workers have no say over which provider they hold their pension in
  • Most unaware of huge differences between best and worst pension schemes

If the Minister for Pensions reads this article over her cornflakes, she may be wondering just how this fits in to her mantra that our pension framework should be “adequate-fair – predictable”.

If I were her, I’d be on the phone to the Value for Money team in her department and telling them this is exactly why we need a Value for Money framework.

We need action from Government, not to allow some Trustees and other fiduciaries to blunder on offering poor outcomes in the hope that it will get better. We need action to put an end to the ongoing failures of certain pension schemes who consistently under-deliver while over promising VFM in Chair Statements.

VFM in pensions is measured in numbers and not words.

The Mail asks experts what people who find themselves losing money in their workplace pension should be doing.

Callum Stewart, head of defined contribution investment at Hymans Robertson, says workers should look into their pension provision and hold their employer to account if they are not satisfied.

He says: ‘Ask your employer: what are you doing to review the value and adequacy of my pension provision?’

If your employer is prepared to pay for proper investment advice, then it will be speaking to Callum. If your employer has no budget for this, it currently has no way to work out if the workplace pension they are offering their staff is offering value for its staff money other than to look at the Corporate Adviser League tables.

Fine as these tables are, they give only the highest level view of whether the workplace pension is giving YOU value for money. I won’t rehearse the need for a proper VFM Framework as if you have read my blog recently, you will read little else.

But what I will say now is that 2022 has already ignited the concern of ordinary people about what is going on with their pensions and the answers that they (and Stephanie Hawthorne) are getting sound pretty lame.

Many pension providers automatically put young workers into the highest-risk funds where they stand the greatest chance of good returns, and gradually move them into lower-risk funds as they near retirement age.

The logic is that if a younger worker sees their pension suffer a large market fall, they have plenty of time to make up the losses, whereas for an older worker a big drop just before retirement can be devastating.

Life styling is only one of the factors that impacts good or bad retirement outcomes but it’s the one that’s had most impact over the past two years. I’ve been warning against “de-risking too early” for two decades. I’m quoted in Stephanie Hawthorne’s article.

most default pension funds move savers into lower-risk investments too early in life. ‘Most people will need to invest for decades after they stop working, and it is worrying that most people find themselves invested defensively from their 50s onwards.

It’s crazy to think that people in their fifties are in some kind of pensions endgame that needs to be locked down in bonds. People who reach 50 have life expectancies of 30 years or more and even when you get to state retirement age, you can expect to live close to 20 years. One of the biggest of the defaults – the one offered by Blackrock – starts de-risking even earlier.

Supposing that someone reaching their “target retirement date” is best served by having 60% in bonds, 40% in shares and nothing in cash is odd.

Stephanie has some sympathy with workplace pensions

Pension providers are not entirely to blame – they often work in the dark as they do not know when a member wants to leave the workforce or how they plan to manage their money in retirement.

But how many people access their pension pot without taking their tax free cash first?

If I was working for an employer who was in a workplace pension using this strategy, I would want to know why there was no cash in the glidepath, why I was having to cash out of bonds in 2022 if I wanted to take my tax free cash.

To my mind, the winners in workplace pensions are predictable. They are the ones who have looked at the risks savers should be taking and opted to take them and they’ve looked at the risks savers should not be taking – and avoided them.

Why the VFM Framework would help

After 10 years of auto-enrolment we are beginning to get a picture of who is doing well and who is not. The VFM Framework that the Government is consulting on , is not designed to tell employers what to do but to tell them what has happened – so they can answer the question that Callum is suggesting staff ask.

The VFM Framework will flag organizations that charge too much, have ineffective service and who fail to help in the process of getting adequate, fair and predictable pensions by consistently delivering under-sized pension pots to their savers.

While I believe that most questions employers will get will be around the size of pots, high charges and poor service can be predictors that all is not right.

By providing employers with the basic understanding of how their workplace pension is doing, the DWP is hoping to make outcomes of saving more predictable and less a game of roulette. People need to get more for their money. That means helping workplace pensions that do well take over those that don’t. It’s tough, but if we want our pensions out of the Casino, we can’t go on like this.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to We need value for our money not “Retirement Roulette”

  1. John Mather says:

    Surely the AgeWage score is based on IRR which is enhanced by lower charging in traditional models. Why is it suddenly the fashion to compare a component (VFM)of a measure and not the effect of the whole?

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