Robert Holford – VFM as an economics tool

Thanks to Robert Holford for picking up on the DWP’s recent statement that the VFM Framework is going to involve the employer.

Quoting my blog to Nico and Darren is a great way to get a discussion going and the discussion that ensues is interesting.

We’ve got used to a view on this podcast that workplace pensions are a commodity and should be treated like a utility (water co, phone operator etc.)  – pile em high- sell em cheap.

Pensions a utility – you betcha – the AE funded workplace pension is the SERPS substitute that doesn’t need competition to work – yup – that’s where we were in 2012 and where a lot of deep thinkers think AE will end up.

Except – people didn’t like SERPS much – although it was a whole load more efficient than any workplace pension. The bottom line is we decided to swap an unfunded promise for  a big fat pot and now we have to live with the consequences. The consequences are generally ok – except where sometimes they’re not – and when they’re not – then someone has to do something.

After all, we’re dealing with something very important here – other people’s money.

Cue employers.

Excuse me for recognising a kindred spirit – I expect that there is somebody out there already fuming that I’m talking my own book,  but Robert sounds the kind of VFM enthusiast who turns up on the podcast because he wants to. Infact the point of the podcast is to hear contrarian views – to the status quo and to your own. Wanting to get employers involved in VFM is contrarian – it is not what trustees or providers would prefer, they would rather the VFM assessment remains where it is today, in a quiet backwater of regulation where nobody goes.

Robert comes at this thinking big picture , having been at both TPR and FCA. His analysis of the differences between the FCA and TPR’s style and purpose of regulating is excellent.

To Robert, VFM is about the investment return – reducing outliers and increasing the efficiency of the investment process so that overall we get more.

Robert also has an excellent characterisation of a single pot as a suitcase not a collection of handbags. I guess that may be a little male but when you’re dealing with something “inhuman” like saving for something that won’t happen for 40 years, who cares about the fancy stuff. Robert doesn’t sound much of a fan of engagement (or handbags).

None of this goes down very well with Nico and his view (from about 54 mins) that we over value pensions in the UK is well worth listening to.

I have to admire Darren on this podcast, not least for his capacity to keep the peace with such enthusiasm – on the back of two and a half days revelry in Edinburgh.

Mark Ormston next week, Ros Altmann on her way, Adrian Boulding on the horizon, this looks like a podcast with legs – well done the boys. The ongoing capacity of the pod to capture the big fish is because it is not afraid to include the Robert Holfords of this world.



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 Robert Holford – VFM as an economics tool

  1. John Mather says:

    “treated like a utility (water co etc.) “
    This is what utilities would like you to think.

    What they do is quietly feather their own nest (dividends to owners) while polluting (failing to do the job of removing crap)

    The analogy applied to pensions would suggest that the fee earners get paid but do not even preserve the buying power of contributions made today and spent tomorrow.

    Behind every income stream there is the sum of income forgone today plus return less fees and tax.

    All you then need to consider is who has the longevity risk of turning that into sustainable buying power. Once you understand where the risk resides a view can be taken on the danger of misplaced trust.

    The record is not encouraging

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