From liner to lifeboat – how we sank the ship of fools

Posted on February 10, 2024 by henry tapper

Review of impact on DB landscape
following LDI Episode

The 58 page report from TPR to parliament on the impact of the “LDI episode” , sparked a response from me , but also from readers who have been commenting. These comments (as usual) are better informed and contain sharper insights than my blog, so it seems right to give them an airing on a dank February Saturday morning.

Here is Con Keating

It is interesting to note that in the covering note, there appears to be some migration of TPR’s ambition: “TPR’s key priorities as a regulator are to protect savers’ money by making sure trustees and employers comply with their duties; enhance the system through effective market oversight, influencing better practice; and to support innovation in savers’ interests.”

The cover note highlights the following findings of the Report:
“Our modelling shows aggregate funding levels of DB schemes improved over 2022 on a variety of measures:
• Funding levels improved for 87% of schemes on the statutory ‘technical provisions’ (TP) basis.

• Only 5% of DB schemes experienced both a deterioration in their funding level and either an increase in their existing funding deficit, or a movement from surplus to deficit, over 2022.

• By the end of 2022 our analysis suggests that broadly 80% of schemes were in surplus on a TP basis and on a buyout basis.

• About 4 in 10 schemes are estimated to be fully funded as at the end of December 2022 compared to less than 10% at the end of December 2021.”

It is deeply disconcerting to find at the overarching summary level such an obvious inconsistency – final two bullets above. If 80% of schemes are in surplus on both TP and Buy-out bases (estimated to be 15% – 20% above TP), then only about 5% of schemes would be in deficit of a TP basis alone. This is completely inconsistent with 40% (4 in 10) being fully funded. These figures are also inconsistent with the figures reported by the PPF on a s179 basis. In December 2021, PPF reports 2,156 schemes (41.3%) in deficit and 3063 in surplus. In December, the PPF reports 686 (13.4%) in deficit and 4,445 in surplus.

Iain (Clacher)  and I have been asked to produce a full analysis of the Report – we will make it available here when (though given the length of the Report, it may have to be published in part-work form)

We have a reply from Jnamdoc

That will be great Con, much needed and eagerly awaited.

It will of course be completely lost on the TPR that most informed commentators have immediately discounted what they say, waiting and needing some independent analysis that you and others will provide, and they continue displaying the exact protectionist deny-all reactions (as for example deployed so poorly by the Post Office on Horizon) with no-one apparently displaying the hubris or morale compass to comment in an unbiased way….

The objective facts are that the nation’s store of wealth, intended to support the economy into producing the returns required to pay a modest inflation-adjusting income to our non-working elderly, has diminished by circa half-a-trillion pounds (£500,000,000,000 !!! – that’s an awful lot of zeros and future taxes!) – that is a staggering loss in value in any terms, but the impact on the nation’s ability to fund an inflation adjusting pension is so much worse when compared against the cost of living impacted by global inflation factors.

Let’s be clear that is an absolutely catastrophic and totally avoidable loss in value inflicted upon the people of this nation from the supervision and coercion of a Regulator operating without Ministerial control or oversight and left to define and adjust its own brief.

TPR still try to obfuscate this by limited their narrative to the individual scheme level, when they should be considering the whole system basis, and by that I mean the pension system as an integrated part of a productive economy. If you “de-risk” an economy on such a whole system basis – as they coerced schemes over the last 2 decades – its should be of no surprise to end up with such low productivity and truly enormous levels of borrowing.

A wise former MNT, am experienced union rep (in trying to cut through all of the consultant jargon and mis-direction), once summarised for fellow Trustees that the operating of pension scheme was like charting an ocean-liner on a very long journey, often through choppy and uncertain waters, making small changes in direction, relying on its own sense of resilience and guided by a clear destination in mind.

TPR – with no real experience of ever having been on such a liner – saw LDI as the lifeboat into which it arbitrarily threw schemes, off of their safe liners – in most cases without even considering if they even needed to be ‘rescued’: the result has been that so many schemes ended up totally unnecessarily on the same inflexible lifeboat, and that unguided (without data or oversight) it was not able to react to events, so becoming the enormous deadweight anchor jeopardising and dragging down the very economic liner we all need to pay the pensions, and provide for our public services.

We need less, clearer regulation on pension investments. TPR needs to have the courage to accept it doesn’t really understand ‘investment’, and to step back a good bit from its current one-size fits all interventionist mindset, and instead provide more support to schemes to chart their own courses.

About henry tapper

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