“Muddled , vague and confusing” – Brian Henderson’s take on the VFM framework

This episode was brought forward so that Nico could watch motor racing in Italy. It’s a bummer for Nico that he’d chosen Emilia Romagna as his grand prix, thoughts and sympathy are with him as the grand prix has been flooded off. This news came too late for the podcast as did the happier news that the Podcast’s sponsor has bought the Pensions Expert title, which will give the lads a larger organ.

Ironically, this week’s guest, Brian Henderson is a campaigner to avert climate change and much of the early part of this week’s pod is about the capacity (or lack of it) of the UK funds sect0r – to block Shell’s ongoing contribution to global warning and generally miserable weather.

Brian is an old school actuary applying his skills to the implementation of ESG through Mercer’s advice. He is also a veteran of performance measurement having cut his teeth at the WM Company compiling the Combined Actuarial Performance Statistics (CAPS).

Though he works in a new area of measurement, Brian comes at VFM in a very traditional way and his position on the VFM Framework could be defined as the “control” or “establishment line”.

And it’s interesting that Brian couldn’t work out Value for Money  though he  could work out “good value” through the lens of an individual. The DWP’s definition of VFM is “muddled , vague and confusing“, or maybe that’s just an actuary’s view of the way DC savers behave.

The podcast is mainly about what Brian perceives value to be and he ends up musing on what values make good values?  Better quality – lasted longer – looking good, Brian sees value as  “reassuringly expensive Stella Artois“.

I thought at this point that we were going to degenerate into a discussion of beer but Brian, a tee-totaller, had other ideas.

If he’d ever tasted Stella Artois he’d know that so have most of his listeners!

Somehow, Brian managed to move from Stella Artois to a definition of “good“. Good pensions happen when a pension scheme rates highly on quality, longevity and appeal.

This is an  actuary’s view, I don’t think it’s a view that would resonate with many savers but I did say that this was old school.

We have to wait for what quality, longevity and appeal mean in this context as Brian launches into an attack on comparison tables (which he grew up updating) and which he sees as leading to organizations herding into zero risk options.  Call me cynical but we’ve seen plenty of herding into low-risk passive defaults without comparison tables but I take his point

It’s hard for an actuary to sound passionate and you can hear Brian winding himself up “it’s not  like me  to have strong views” he tells us but it’s clear that he’s got a good idea of what “manifests itself as  a good quality outcome“. I love this muffled passion, Brian has his view and it’s clearly articulated

Quality is grounded in past experience , it displays quality features and those quality features include  “matching contributions and free admin“. Rather than compare outcomes with other people’s outcomes, outcomes should be compared with inflation


“Why should I compare this with anyone else? Why not compare with inflation- if you don’t beat inflation over 5 years you’re not getting good value”.

We are in the world of the Pension Regulator’s 31 characteristics of a good DC pension, of the Pension Quality Mark and of a vision of DC firmly rooted in the past. It’s old school alright.

To nudge Brian’s mile rant along, Nico asks Brian if he was emperor for the day – what would he change?

Brian would have contribution levels as a mark of quality in VFM assessments. I don’t know if he speaks for old school actuaries everywhere but I can hear the keypads of a thousand calculators clicking in approval.

So if aren’t with an employer  offering you a sodding great contribution  you aren’t getting VFM.

The trouble is – this excludes 90% of employers who don’t so much as offer a shared cost salary exchange scheme – just the AE minima necessary to comply. It renders VFM an adjunct to the consulting offered by the firms that Brian has spent his career in – Hymans and Mercer.

Could Nest ever be VFM? How many if its participating employees  offer an employer contribution match or a contribution rate comparable to the funding rate of the DB schemes that purchased using the CAPS tables. Maybe a handful out of the million employer participating in Nest . This is how actuaries blindside themselves.

This is a world where there is always money to pay the deficit contributions and the Trustee fees. This is a world where VAT, payroll and invoices are met in full and on time. That is the quality world that measures up to actuarial expectations.

And in this world of quality, value is sustained over time. Value has longevity – like the jobs that an actuarial world offers. It’s a world where you get consistent good value through time. This is not a world for uber-drivers or office cleaners or the people on the check-out at Iceland.

Throw in all the good things a scheme can do to improve ESG, make it appealing with platforms, websites and personalized videos. Give everyone everything and you give a quality no expense spared experience.

This is what makes a pension roadworthy and “if it’s not roadworthy , it should be taken off the road”.

That way we’d only have VFM pensions, and those who had them could thank the pensions industry for this comfortable garden with the highest of walls.

But , as the selfish giant found, making an exclusive wall-garden – doesn’t make anybody very happy.

The selfish giant had an exclusion complex

About henry tapper

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

Leave a Reply