“I am an actuary” – Boulding’s shock admission on VFM Pod 27

Boulding ( a car enthusiast among other things)

Yes – the great man does say it – in response to a genuine inquiry from Darren Philp.

Are you an actuary Adrian?

There could be no greater compliment to Adrian that he speaks the language and thinks the thoughts of the rest of us and can be asked this question.

It is a super-pleasurable experience listening to Adrian, Nico and Darren.This podcast is 76 minutes and I wanted it to go on another hour. A guilty secret – I have listened to this podcast twice.

I’ll swerve the gossip and get to an astounding piece of pensions history which could rear its head again. When Adrian , David Yeandle and Paul Johnson were advising Steve Webb in 2010 about how to take Auto Enrolment forward, they made 23 recommendations , 22 of which were accepted and one wasn’t.

Bombshell 1

The one that wasn’t accepted was the safe harbour for employers  choosing a workplace pensions. I had forgotten that this was a provision of stakeholder pension regulations and Steve Webb dropped it for workplace pensions , ignoring or rejecting the recommendation of the “AE three”.

For 13 years, this decision has lain dormant. Now it’s a hot potato as employers look to be central to the VFM framework (as Darren points out). If there is no safe harbour, what is the coast looking like for employers who’ve chosen badly . I’d say it’s rocky! Which is why we need to either consider making the choice an authorised workplace pension risk-free or spell out to employers what their duty is . We should also spell out the risk of not paying attention to the workplace pension.

Thanks Adrian for bombshell 1 – worth the price of admission on its own.

Bombshell 2

Employers need help , not insults!  This famous  quote insults the intelligence of employers. They aren’t thick or uncaring – they need help!

Adrian’s explanation of how employers behave is so robust, funny and right that it ought to be cut and pasted into a briefing for Laura Trott.. It’s often said, indeed repeated in this podcast, is that employers are poor purchasers of workplace pensions. Adrian’s view is different, he sees employers as the heroes of auto-enrolment.

Thanks Adrian for reminding us that employers aren’t dumb and selfish.

Bombshell 3 – “CDC will be a great addition to the market”

CDC’s for long-serving staff – says Adrian. Adrian is an unashamed fan of CDC (as I am) and he sees applications for it as a section of a master trust for employers who give a damn.

Boulding reminds us that the IFS debunks the smile shaped curve of retirement expenditure, proving that most people do need more money in their 80s and 90s than in their 60s and 70s.

Adrian’s 5 reasons for supporting CDC will be memorised and nailed to the Tapper door like Luther’s 95 Theses were pinned up in Wittenberg.

CDC gives you

  1. Better returns from more risky assets  – meaning better outcomes (no de-risking)
  2. More risky assets for longer, because there is no end point of a CDC
  3. Pooled mortality – no money wasted on inheritance
  4. No guarantees – no reserves or buffers
  5. Lower charges and expenses

What’s more, CDC gives you a pension that provides inflation protection.

Thanks Adrian for explaining CDC in a way that makes me want a CDC pension (even more)

Bombshell 4 _Prudential actuary abandons prudence!

My favorite quote from this marvellous episode comes when Adrian turns to the management of CDC schemes

“Normal actuaries don’t need to apply for the job – we need a new breed of actuaries who distribute 100% of the available fund to members every year”

At this point Boulding puts clear blue water between CDC and with-profits. The actuarial black box of reserving, buffering and baffling need not apply. We can have a clear formula for CDC distribution and if not a formula, a discretionary policy that is open to scrutiny.

And to ease our savaged brows, Boulding explains that “Every CDC scheme has to have an escape route planned“.  This from the author of the concept of “prisoner exchange” (now member exchange). Boulding is out there explaining CDC with both humor and precision

Thanks to Adrian , for making CDC fun!

A great episode

I don’t agree with everything that Adrian champions, I certainly don’t agree with putting annuities on wealth platforms so that advisers can treat them as assets under advice. Adrian had better not mention that when we have lunch next week!

But it’s impossible not to listen to this podcast without being inspired to think further than you’ve thought before. Adrian is a pension pilates instructor, getting you into positions you’d never expected to take and leaving you breathless but mentally supple at the end.

A word too to Nico and Darren who are on fine form, adding to a great episod.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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