Is history bunk? Or does past performance matter?

Few would disagree with Ford, that we are the history-makers. This blog is about making good decisions informed by what has happened in the past, it is not about repeating the mistakes of the past (the bunk).

I’d be grateful if some of my readers would take a moment to flick through this presentation.

In our submission to the DWP, we suggested that the people who take decisions on the pension we get offered in the workplace ,  needs to offer VFM and that value can be measured by what we pay and what we get for the money we forego.

We also suggested that people can use the value achieved by past investment – as a means to think about thee future. In doing so , we are leaving ourselves a hostage to fortune.


We have no way of being sure of what we get in the future, there is no employer at the end of our careers who will top up our pot to guarantee us a defined wage for life.

Nor is there anyway of knowing if what we’ve built up in our pot will have protected us from the impact of inflation. The current bout of inflation , unless it is matched by a serious increase in the value of the average saver’s pot will have a swingeing impact on drawdown income.

Whatever conclusion we want to draw about investment performance, it will never properly explain the complexity of “value”, because the value of a wage for life is relative to future imponderables (including how long that wage is to be paid).

For all these reasons, many experts think that the investment return on a pot, is not a good way to measure “value” – but we at AgeWage – don’t take that view.

Lovers of certainty – look away!

Here’s the next stage in AgeWage’s development – a Future Score that one wag has termed the “age wager” – a way to help you narrow the odds that what you choose for your saver’s future investment will be a good choice.

The DWP asked if there was a way that we could use data from the past to create a future score that meaningfully informed people about where value might be found, for the money that savers had and had yet to commit.

Our initial view was that this would be idle speculation – mainly to ensure that pension schemes were accountable for the decisions fiduciaries had taken in the past.

Meanwhile we were contemplating what could be gleaned from the data we have on the various pension funds we have analyzed and came to some simple conclusions.

  1. Some DC default funds consistently get it right
  2. Some consistently get it wrong
  3. Some DC default funds get there eventually but are all over the place in the meantime.

On investment grounds , schemes that run defaults that consistently get it wrong need to be banned. They need to be identified, isolated and made to hand over the money to another pension provider. This may sound brutal, but if the VFM framework is to be worth doing, it has to have teeth.

Schemes that have defaults that consistently add value over time need to be called out for doing so. Here’s some metrics on a scheme we’ve been analysing for a few years now. Although its assets fell last year, it is still providing value, albeit that value is falling (it had a bad year in 2022)

If the trend on performance continued to detoriate, then its fiduciaries might start asking about the future direction of the scheme’s performance. They might ask if the scheme’s future score might fall below 50 – and the benchmark return savers should be expecting.

The fiduciaries might ask if the scheme is a 1 or a 3 (in the categorizations above). We know the answer to that question and will share it with the fiduciaries.

Can this information be available to all purchasers of workplace pensions?

The answer to that question needs to be “yes”. Whether VFM assessments are carried out yearly (as in the example above) or every three years (as DB (e)valuations are), we believe that performance reviews need to be consistent, relevant and vigorous.


Performance measurement must be carried out in the same way against the same benchmarks over time


Performance measurement must be based on the cost and charges the purchaser is actually paying, that means including multiple charging structures, own scheme charges and that it’s based on the default fund the purchaser is using, not the one chosen for the analysis by the provider


The analysis needs to consider not just the past performance of the fund, but the risk taken to achieve that performance, we think that past performance can be simplified to a score that takes into account over or underperformance over time. We thing that indicative performance can use the past as a base but take into account the volatility of returns as a measure of risk taken.

Why does this matter?

As I wrote yesterday, the current system of net performance measurement is not fit for purpose. It is a hangover from DB fund reporting and takes no notice of returns actually received by savers. There is an alternative way to measure past and inform on the future.

History is not bunk, it contains the keys to the future if only we can find them and find the lock!

We have found some of the keys and we know how to engage purchasers of workplace pensions to unlock insights.

By moving the argument on, away from a focus on price and towards a focus on value, we need to make investment performance measurement, consistent, relevant and vigorous.

AgeWage has recently had its 5th birthday. We hope that in 5 years time, we can say these things having won your support!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Is history bunk? Or does past performance matter?

  1. The trouble with past performance is that there are few ways to assess why it happened. Planning, skill, or luck (good or bad). If it was assessed against what was promised / forecast then that would make it a better measure of achievement and understanding. I’ve always wanted to find somewhere that did compare outcomes against forecasts for all sorts of commentators and experts. Is there anywhere?

    • byronmckeeby says:

      The mistake that many DB trustees make (usually led there by their consultants) is to appoint investment managers with mandates set relative to market indices.

      When measuring subsequent performance from that reference point the market returns tend to be predominant in any explanations given.

      An alternative (or at least in parallel) approach could be to ask prospective managers what their initial yield is, how they expect that yield to develop year-on-year, how much additional “growth” return they expect from market re-rating/re-pricing, and any other sources of return (positive or negative) they expect from hedging or “active currency” or whatever tools of their trade they use.

      Given that different frame of reference it is then possible to interrogate subsequent performance in terms of actuals compared with expected.

      I’ve seen it done, but it’s not done by many.

      As for history, “[it]is a Greek word which means, literally, just investigation.”
      — Arnold Toynbee

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