Arun Muralidhar spoke at the Pension PlayPen yesterday.You can watch the video here or download it for your private delectation!
There is nothing in Arun’s big idea that isn’t in the British savings culture. Peter Cameron Brown reminded us that National Insurance has been used by millions to save for retirement.
What is new is that the Selfies that Arun has helped become the retirement income system for Brazil provide coupons that pay income and do not offer a capital value at the end of the 20 years in which income is paid.
We heard how this went down well at the DWP and to ears that are adjacent to mouths that get to Ministers! There are black holes in the pension coverage system, especially for the self-employed and with part 2 of the Pension Reform project due to kick off soon, maybe Selfies have a part to play in “adequacy” for the self-employed and others outside the scope of auto-enrolment.
Steve Goddard made the excellent proposal that a £5 Selfie starter for anyone registered self employed be implemented before the end of the parliament. This would mean that income was on its way to those who have no income in retirement other than the state pension.
I’d be interested in more thoughts from Arun and others about use of Selfies and advantages to our economy of money flowing to Government. This should be no more than a “faceless bond”. Bob Compton pointed out that there have been War and Water bonds in the past and Selfies could be a pension bond investing in regenerating parts of the British Economy badly in need of capital
Addendum
Arun has posted on Linked in as a comment to the above
Here are a couple of benefits to HM Treasury and then hopefully to the UK economy and prospects for growth.
The idea of NSI providing an index linked range of annuities providing value and diverting profit to the Treasury to reduce national debt over the next 30 years would be a socially responsibly product. It would also satisfy Henry’s pension income ambitions.
I don’t buy a product that does not prepare for 100 year life.
A temporary differed annuity without escalation with risk back on the buyer based on a backward looking mortality experience.
my question was not answered in yesterdays session so if I have described the bond incorrectly I would love to be enlightened.
I agree with John that a fixed 20 year horizon is questionable, while accepting that most people underestimate their longevity.
As for the idea that the self-employed should save/invest via selfie-like bonds, my criticism would be this seems in part to rely on ideas of pound-cost-averaging when it comes to instalment investing.
For example https://www.citystgeorges.ac.uk/__data/assets/pdf_file/0008/128384/Dollar-Cost-Averaging-09052012.pdf
My final comment (again from a self-employed perspective, and personal experiences) the earnings profile can be quite variable, sometimes by choice. Similarly if the focus is only on retirement income (which may tap in well to many people’s expectations, but not mine), we are poorly prepared for one off events: paying for daughters’ weddings, paying for cruises, paying for unexpected health issues with attendant lump sum costs, house purchases or modifications, etc.
The same result can be achieved with a series of deferred temporary annuities but for the income to stop after 20 years on the basis that that’s the average retirement expectancy would fail half the population. With life expectancy on the rise it would be reasonable to assume it would fail most of the population.
Not sure I agree.
The distribution of lifespan is not symmetrical.
It is skewed to the left, meaning more people die before the average than after.
Therefore, the proportion of people living beyond, say, 85, or 86 or 87, is less than 50%.
But still a significant minority, and on that we can agree.
I stand corrected the seems to be a 3 year difference between the median and the mean which gives 55-58% so per million 550000-580000 die after the mean which adds to my comment that the 20 year life is more planned failure
I also stand corrected, thanks, John.
I shouldn’t have relied on AI for that previous, sweeping attempt at an answer.
The latest ONS release in March 2025, updated for 2021-23, showed period life expectancy in the UK at age 65 years was 18.5 years for males and 21.0 years for females.
Still reported “at age 65”
despite state pension age being 66 since October 2020.
This suggests to me that a 20-year annuity taken out at age 66 will satisfy more than half of the males, and about half of the females.
UK life expectancy at birth was lower at 78.8 years for males and 82.8 years for females.
The median age at death was 81.8 years for males and 85.5 years for females in 2020.
The most common age at death (modal age) in 2020, however, was 87.1 years for males and 89.3 years for females in England and Wales, for those aged 10 and over.
Similar modal age information for Scotland and Northern Ireland did not seem to be available, but was presumably slightly lower in both regions, maybe by 2 years in Scotland and around half a year in Northern Ireland.
No doubt some of the actuaries who read these blogs may prefer CMI to ONS, and if anyone has “better data” we’d be grateful to see it!
Thank you I am tending towards buying RPI linked joint life annuities with my own pension funds rather than facing a 76% tax charge on anything left beyond my wife and myself.
I am encouraged that with parents who died at 96 and 100 my prognosis (on paper) looks hopeful of getting to 100.
My wife (10 years younger) had a similar situation (94&96)
An Agewage score of 100 I hope to maintain until I see the time is right to buy the annuity. If anyone knows where to buy a € denominated annuity I would appreciate the info to enable some diversification.
I would presume the Germans may have euro-based annuities?
The OECD also seem to want them to move from book reserve pensions to asset-backed:
http://www.europeanpensions.net/ep/OECD-calls-for-mandatory-asset-backed-occupational-pensions-in-Germany.php
Returning to the lecture on Brazil’s solution
There is merit in buying a range of indexed deferred annuities from NSi issue by the Government to pay off foreign holders of gilts. I liked the idea of small unit value which could use distributive ledger technology borrowed from bitcoin accounting to keep track of ownership and defend against fraud. The risk is then clearly with the tax payer via government. If the State pension is to continue to provide 30% of a living wage and if this was the objective to top up to comfort level then how much above or below target would be a simple graphic of the petrol gauge variety. VFM becomes a comparison with this system as bench mark
If government wants to widen the infrastructure the risk is again with government on behalf of the tax payer.
Chris Giles made very valuable comments a year ago https://www.linkedin.com/pulse/uk-government-has-source-funds-boost-capital-spending-chris-giles-6vlwe