Nico

Darren

Brian Henderson is so very humble about what he’s doing that it’s hard to remember how much influence he has had. He was Mercer’s Director of DC consulting throughout the period when workplace pensions were being established.  Mercer helped  the requirement of over 1m employers , offering them something to auto-enrol their staff into.

Sad to say , Mercer did a pretty bad job building its own master trust.  Since moving into other parts of Mercer. Brian left behind a rather limp DC consulting proposition. Mercer not Brian has bought the shocking NOW pensions and has been most quiet on CDC to the point that I forget that they are one of the largest benefit consultants. They’re a bit of a stinker on DC and CDC at the moment!

I suspect that the pro-bono work that Brian’s doing on DC work today is a penance for his former firm’s lack of positive influence!

I have to say, Brian speaks for a lot of those inside the industry and he speaks for people like him (a DC guru) and Nico (a DC actuary) and Darren (a DC lover and economist) who are coming to terms with a fast-changing pension landscape.

On the one hand, we have CDC and the Pension Schemes Act that has turned saving for retirement (and pension) freedom, on the other we have the Pensions Commission. But most alarming to the pension industry is that CDC is becoming a disruptor. The success of CDC to capture the imagination of unions, large employers and some advisers is down to a Government which since 2018 has been moving towards a time of defined contribution that offers a pension not a pot.

In this episode of the V-FM Pensions series, Brian explains the reason he has done work explaining how the world has changed and how now the default for any pension saver is a pension. At well over 90 minutes, this podcast is in extra time but for once I think it is worth our time. I do like Brian and his recent work features on my blog because it is sane and soothes the troubled brows of those like the intrepid hosts of this pod. Brian’s is #172.

I will quote Darren who has written the introduction

In this episode of V-FM Pensions, hosts Nico and Darren chat to Brian Henderson, who last appeared on the podcast back in its early days in May 2023 (episode #19).

Brian returns to discuss his recent series of essays exploring the thorny question of how the pensions industry develops, and compares, retirement solutions.

Nico’s news story is about ‘P(doom)’, sparking an in-depth conversation about AI in which we even venture into the possibility of time travel…

We then get into Brian’s essays: what prompted him to write them and the conclusions he has drawn. At the heart of the discussion is a deceptively simple question: do we actually know what ‘good’ looks like when it comes to retirement solutions?

There are lots of proposed solutions with considerable merits, but all involve trade-offs. Are we properly understanding, testing and discussing those trade-offs? And are we doing enough to understand what people actually want and need from retirement?

We also catch up on what Brian’s been up to since he last joined us. But if you want to know what value for money means to Brian, you’ll have to go back and listen to episode #19…

For an understanding of what Brian’s essays are about, Brian has condensed his thinking into a relatively simple diagram.

Unsurprisingly, for folk like Brian, Darren and Nico – “drawdown throughout” gives the highest capital back to those for whom capital return is the principal requirement of pension saving.

Total income “CDC” is value for money for those who want income and has given the best overall deal if you live a little beyond 20 years after starting your collective pension.

This is very balanced. The listeners to the V-FM podcast are more likely to want to create wealth from their DC pot but may end up paying themselves a pension, as Brian says in the pod – there is a place for a minority for a third party – the annuity. But that doesn’t look VFM to me, not when CDC is available.

I sense that Flex and Fix is not the product for the super smart financial service people who have plenty of alternatives to their pension pot to drawdown from and Flex and Fix is really a halfway house between a pension and a drawdown with an annuity doing its job when people are supposed to have lost the capacity to take any form of risk. I suspect that Flex will last longer than 10 years (few will default savers into drawdown at 67 and kick them into annuities at 77, but we will see. Brian’s chart shows this doesn’t give much value and I suspect that Nest’s view – that the annuity is bought at 85 is better value and does not put member’s retirement income too much at risk.

But I do what this podcast does and I’m wittering on a little too much. Click on the link above and listen to the very pleasant conversation.