Andy Haldane has been contrasting  in the FT of the bungled efforts of Oasis and the smart ticketing of Taylor Swift . David Bowie predicted a decade ago that the experience of a live concert would overtake the economic impact of performed music and Haldane concludes

especially at times of uncertainty and economic turning points, much of the variation in economic activity can be explained by sentiment rather than fundamentals. Stories shape spending. The degree of optimism or pessimism expressed in the words used in songs and books can be a good predictor of economic activity

Stories do indeed shape spending, people who have no idea of how bad Oasis are in concert queue up to be scalped based on the band’s legendary bad brother status. Swift delivered a story that could be told by the millions who saw her, to the billions who didn’t, the “wish you were here”- selfie video, amplified on you-tube, Insta and tic-toc becoming a validation of the sender.

The detail doesn’t matter.

Listening to Nico and Darren’s critique of the FCA’s latest version of the VFM consultation, I had three thoughts

1. Agreed, it’s a dog’s breakfast of imperfect measures
2. It doesn’t speak the Treasury’s mind- VFM is a means to consolidate
3. We are already way beyond dealing with the detail.

Stories shape spending and if the Government can find a way to put red beside schemes it doesn’t want and green beside schemes it does, how they get there is immaterial.

We could have had a coherent way of measuring risks taken and rewards granted by using member’s data rather than top-down quant, but that’s like worrying whether Liam sang a duff note or three – the story’s “morning glory” – a new page for workplace pensions (see the short but sweet HMT consultation on pension investment).

You can listen to the lads chunter through the 220 pages of CP24/16 here

You can read our response , which actually addresses the questions, here

Or you can download the consultation yourself and add your thoughts here

Or you can read it here

Not knowing the least thing about pensions..

Sometimes it is best to hold your hands up and say you don’t know the least thing about pensions, because you can then leave all this nasty detail to the regulators and the poor sods who have to fill out and analyse the information submitted.

This has of course been going on for the best part of a decade with the IGCs , GAA and trust based schemes all having a stab at VFM. It hasn’t made much of a difference, GPPs still compare each other on price, DC master trusts still argue that they answer to TPR and aren’t really competing with GPPs (while competing on price) and occupational DC schemes still hold themselves out as the last bastion of mutuality while delivering no more than a tax-advantaged savings scheme.

My solution to VFM’s  over complex , under-focussed and unloved framework is to review it in three years and then adopt a data-based approach that measures what savers get rather than the performance of the various suppliers.

My response to the Government’s Pension Investment Call for Evidence is that it should be minded to use its Overton Window to

1. Junk GPPs as workplace pensions and bulk transfer benefits into master trusts
2. Require single sponsor DC occupational schemes to hand over the keys to master trusts
3. Require Master Trusts to submit business plans that show they can achieve £50bn in assets by the end of the decade or fold into those who can
4. Focus on the remaining master trusts and require them to pay their own pensions within five years
5. Continue to make it easier for large schemes to  access private market opportunities, especially home-grown ones.

Stories shape spending

There really is only one agenda item for the Treasury, it is to create the growth in the UK economy to pay its bills. If the story for pensions is that they need to be £50bn in size to make an appreciable difference to the economy, then we should stop faffing about and say so.

The VFM framework is the Government’s chosen way to turn the heat up on GPPs , small Master Trusts and occupational DC schemes to the point that they concede and give up. We will spend our retirement savings on schemes that are big enough to deliver value and can pay pensions either under the DB or CDC rules.

That will leave us with around ten large master trusts – some of which will have been created by consolidation (think banking, pharma and financial services) the rest of which are on their way to £50bn today, Nest, People’s , Lifesight and one or two of the insurers.

In time , the VFM framework will turn from being a convenient policy tool for consolidation to something that helps members to a point that they can make sense of their pensions.

But to do that, we need to tell the story that shapes the spending.