Pension Mandation and “the irrelevance of the Lords as a talking shop”

Posted on March 22, 2026 by henry tapper

Guy Opperman may not be a part of the Labour Government but he understands how governments work and why the protest from those arguing for fiduciary freedom will not be granted the amendment the House of Lords has sent downstairs

The following statement is from a friend who like Guy Opperman , knows Government well.

Guy Opperman is spot on right on this. Government will do what it wants.  They may or may not make some tweaks.

The triumphalism of the fiduciary duty/trustee crowd doesn’t matter one jot.   It could easily be counterproductive. Greater scrutiny of the merits and otherwise of fiduciary duty for starters. Or just skip that.

Nationalise AE making it what it is – funded social security. Freeing up all pension savings on top of that, but using the changes to cut tax and NI relief.

Well there’s a thought. I didn’t think the Pensions Minister held the “fiduciary duty/trustee crowd” in high regard at the Pensions UK conference earlier this month.

There was a lot of teeth-grinding following Guy Opperman’s realistic post. I include two examples. The first from Graham is just petulance and included as it represents the frustration who breathe the thin air at the fiduciary summit….

Tom’ s post suggests that the Labour Government may lose the whole Pension Schemes Bill in the ping pong of this amendment between Upper and Lower house of parliament.

I am surprised if this will happen, this Government has a big majority and the Pension Schemes Bill is one that is generally popular on all sides (putting “mandation” aside).

Guy Opperman offers little solace to Tom and to his private correspondents

To show that I’m not the only fan of Torsten and his bill and his support from the Chancellor…

This is a message from one of my friends

This is not a good time for industry special pleading, with the wider demographically driven outlook over the foreseeable next few decades.

It shows many things. The irrelevance of the Lords other than as a talking shop, often interesting, but essentially a retirement home. Where mysteriously people get paid to be residents.

The real problem is however not that they are ineffectual and waste resources but that we need a second chamber that does have the ability to have some effect.

The ABI, Pensions UK, IFS , PMI and endless pension professionals (including good friends) stand against mandation.  I’m not interested in this high-minded principle. I’m interested in getting things done – something we do very little of.

 

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DC offers flexible income while CDC provides deferred pay (the genius of Derek Scott)

Posted on March 22, 2026 by henry tapper

Here’s my friendly Scottish Accountant and Pension Trustee – Derek Scott, reminding me that for many people, the ideas of salary and pensions as “deferred pay” are old fashioned

I think, since Barber vs GRE in 1990, you’ll find that occupational retirement benefits are already considered “deferred pay”.

“Salary” now seems a rather quaint idea, a fixed, regular payment (typically monthly) independent of hours worked, allegedly offering more stability and salary-related benefits.

It’s not just employers in the “gig economy” who these days prefer short-term contracts and variable pay based on an hourly or daily rate, perhaps allowing for minimum hours and/or an element of overtime pay.

State pension offers a minimum (but inadequate) level of “income” in retirement, while one of the other features of modern-day retirement is that cash requirements may be lumpier and irregular and unpredictable.

This in turn may mean pot decumulation strategies such as flexi-access drawdown (some of which is still tax free) alongside optional insurance products very much still have their place.

This is very modern thinking from someone who could be thought a veteran! I think he’s right for many people which is why the ideas of DB and CDC pension don’t resonate with many people of the kind that Derek describes.

Which is why it is important that employer’s decide whether they want the old style pension (as public sector workers get) , CDC pensions – which mimic old style pensions but deliver as the market lets them or whether employees are encouraged to put money away for a later life that they can finance as they choose.

It’s nearly a year since I went to visit Derek in Fife and realised then that he thinks more deeply than almost anyone I know about what people want in retirement. Derek was Chair of Trustees of bus company Stagecoach and Railpen, the railway workers pension scheme. Here are workforces that I see at work a lot, men and women on busses and trains , driving me to schedules that they can often choose. There is increasing flexibility but I’d still consider they see themselves as salaried and their unions, Unite and RMT certainly value certainty of what they call the “deferred pay” of a pension.

There is a tremendous debate going on within unions on this subject and I hope a similar debate in the HR and Reward teams of employers (with pensions being discussed as a benefit not just a liability).

What seems most important is that we establish what options people are given to opt out of “deferred pay” pension arrangements and to what extent, a flex arrangement is promoted over a CDC. I think it could be argued that CDC is not appropriate for all companies but I think, before it is rejected, it needs to be understood, valued and only rejected if the price of freedom is considered worth paying.

We have seen a move in DB consulting to establish TAS300 as a way for an employer and trustees to consider whether to buy-out a pension with a bulk annuity or explore other options (which Stagecoach did with Aberdeen). There are alternatives such as superfunds for DB pension schemes but so far , little of the variety have been chosen to accommodate DB promises.

We should have a similar way to assess DC in its purest form as pension freedom, its halfway house of flex and fix and its deferred pay option, UMES and Retirement CDC.

This may sound hard, but relative to the choices of DB it is relatively easy to make choices based on an understanding of the behaviour and needs of employees. Even if employees appear to be contractors, most who work over time get rights as workers under auto-enrolment so it’s hard for companies to walk away from decisions that they will need to take.

The phrase “deferred pay” is the right one for DB and CDC while  ” flexible income” is the phrase I’d use of DC. They suit different workforces, what kind of workforce is yours?

If we can banish the minute detail of how flex and fix and CDC might work, then we can have a sensible discussion around retirement income as deferred pay or as flexible income.

Thanks Derrick for helping me to think this through. Thanks to Terry Pullinger for making it simple in my head!

CDC pensions such as that provided by Pensions Mutual, should focus on employers whose employees appreciate deferred pay while workplace master trusts may offer a choice to employers of deferred pay or flexible income.

This seems entirely sensible for unions, employers , consultants and providers as a discussion framework.

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What matters more to us – our pension on day one or how it increases?

Posted on March 22, 2026 by henry tapper

Increasing rates of a pensions at inflation (CPI) is half the liability of a pension promise says my friend and colleague Chris Bunford.

Another actuary, Andy Young makes the point that we do more than promise inflation protection with the triple lock

It is the increases on the state pension that make it so expensive. This is a report of our Pension Minister speaking in parliament (pictured above)

Andy Young used to advise pensions ministers on the cost of increases, he knows what he is talking about and Torsten Bell has for many years been warning us that we undervalue the triple lock on our pension increases.

Torsten Bell discussing state pensions in parliament recently

All the evidence is stacked in favour of us valuing the kind of increases we get from the state pension, it is what most of us get from occupational DB plans and it is what CDC will give (and the quotes for retirement income from your DC plans won’t show when you go on the dashboard).

There are of course those who suffer the outrageous unfairness of getting no increases on their occupational pension (the pre 97 pensioners) and they lose over time more than the WASPI women lose  from State Pension Age deferment. The WASPI and Pre 97 frozen pension campaigns are the front and back of the same coin. But I wonder which we worry about more. I think I find an answer in our behaviour. Those people who chose to buy an annuity with their pot ( a number increasing lately) do not generally choose to buy an increasing annuity. It’s still not 20% of those who buy annuities that buy any increase.

Graph from Retirement Line – thank you Mark Ormston

That’s because, we value a higher income today rather than an increasing income tomorrow.

It was an act of supreme responsibility that the Government decided to increase the state pension by the higher of inflation, wage increases or 2.5% .  It was a huge shift of support to those most needing the state pension from general taxation.

What Andy Young talks about in his Linked in post is that the increases used to be on both state pension and SERPS and when we lost SERPS we got DC pots from Auto-enrolled pension saving systems that lead to anything but inflation linked pensions!

If you are Torsten Bell you see from state funded pensions (including the fully inflation linked public sector occupational pensions) which will pay an increasing pension. On the other side of pension planning he sees private sector “pensions” which are just pots of money. Those pots are being exchanged by a small number of us for annuities – for the most part level annuities.

The pots will appear on our dashboards as what the pots can buy as level annuities and even then the income will be shockingly low to many looking at their pots that way. The pension schemes bill/act will mean that the majority of us will get our pots converted by default into a flex then fixed annuity or into a retirement CDC.  If you are Torsten, you have to think hard about the amount of increases built into the retirement income offered for life.

So just as the Pensions Minister that we may not have triple lock increases on our state pension , he has to think about how to get some kind of increases into default retirement income into pots – converted into lifetime retirement income.

My question to myself and to you readers is whether we really think about our future retirement income as “when we get it” or “how we get it”. Most of  workplace pension DC pot  savers have enough to retire for a bit from 55 on what we’ve saved but not enough to retire for our lives. Those who do not cut and run early (and the FCA say a lot do) will keep  money rolling up until the default cuts in and then the defaulters will get paid what the Government tells DC pensions they must give.

The default retirement income under flex and fix has been offered us by Nest (an increasing annuity from 85 and an increasing income from drawdown before then). Retirement CDC will be something like that, without the insurance and the freedom of Nest’s flex drawdown pot. Nest is promising increasese on its default retirement income

Whatever the choice of DC pension default , the impact of any mandated pension increases will be to  depress the default income we get from what we see on our  pensions dashboard. The dashboard will be quoting the level annuity for projections.

This is the second of the Torsten Bell’s problem with increases. Will he be the Pension Minister that makes increases on retirement income part of the default? Will Retirement CDC and “flex and fix” be the two choices to consolidated DC schemes and will people accept that the triple lock is too great an increase (just as annuity purchase was and is no increase for most of us).

In the long term, CPI increases may be adopted for state, public and private pensions (they’re already paid by private DB schemes).  In  the next five years , we’ll have  more discussion about the cost of increase promises to our DC retirement income.

Royal Mail’s CDC scheme promises CPI +1%. Is that 1% – private pension’s triple lock?

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What’s wrong with life assurance paying your tax?

Posted on March 22, 2026 by henry tapper

Yesterday I published a simple article about employers being able to pay for assurance that pays if you die when employed (in service). You can read it from this link

Some people need to take out assurance for themselves. Maybe they want it to stay in place longer than they want or can stay in service.

Whole-of-life cases pay out when the policyholder dies and are often used to cover a future tax liability.

Mary McDougall and Emma Dunkley tell us..

The number processed by wealth manager Evelyn Partners rose by 66 per cent last year compared with 2025, while Royal London’s insurance arm sold 50 per cent more of the policies over the same period.

If you put the policy under the right kind of trust, it will pay out – outside your estate.

“The size of the sums assured has increased dramatically,” said Ian Dyall, head of estate planning at Evelyn Partners. “We are currently helping a number of clients with liabilities in excess of £10mn.”

Some of these assurances will have a big sum assured!

If you want a tax free pay out independent of your employer you can’t individually get tax relief on your policy, If you want your personal pension pot to pay your bill you get tax relief on the way in (and investment growth) but your estate will have to pay inheritance tax on its pay-out.

Put like this, it looks like the people who are winning out of all this are insurance companies. They write the whole of life policies (and some term assurance to cover the period till the gift tax ratchet wears out). They write a lot of DC pension business and of course they underwrite death in service assurance.

“Inheritance tax planning has absolutely exploded,” said Barry O’Dwyer, chief executive of Royal London, adding that “by far” the easiest way to plan for inheritance tax was to buy life insurance that pays out on death.

While there are a few super-rich people who leave a £10m IHT bill behind them, the amounts of people who have not spent their pension pot is higher

The government estimates its proposals will bring about 1.5 per cent more estates within the scope of death duties in 2027-28, on top of the 4 per cent that already exceed the £325,000 nil-rate band, which can rise to £500,000 where a property is passed on. The move is forecast to raise £1.5bn a year for the Treasury by 2030.

Higher, but like most of the tweaks to pension tax, not that big. Like the row about “mandation”, this is more about principle than practice.

Perhaps the best thing that the rich should do is buy an annuity , invest in a CDC pension or exchange their pot for a public sector index-linked pension, if they are newly into service in the NHS, LGPS, Civil Service or (dare I say it) , the Pensions Regulator.

Your pension could pay your life insurance contributions each month. Better still your employer’s death in service benefit, could mean your estate could makes a lot out of your passing with the whole of life and death in service giving your beneficiaries a bonanza.

“Life insurance has exploded!”

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Inheritance tax and Death in Service Benefits

Posted on March 21, 2026 by henry tapper

I tend to trust material coming from First Actuarial. It is simple and clear.

It’s good to see a note on social media on a topic that created uncertainty for millions of workers whose dependents will get a lump sum without threat of tax if they die while employed by a company that offers “death in service.

The value of death in service payments is not recognised till a payment is paid out and then it is an unexpected benefit to a family. It was not right that the value of that benefit could become part of a tricky discussion with the revenue over whether tax might be due.

Many people get this defined benefit but are not , nor ever were accruing pension sponsored by the employer offering them life insurance.  Many save into DC arrangements and if they die will have a pot that may trigger a pot. Those building up a pension in a DB or CDC scheme that pays a pension (to a spouse or partner) should not see that pension become part of the estate assessed for inheritance tax .

There is of course a taxation problem for the well off saving into a DC pot but it may be that moving to CDC assuages that worry (so long as the CDC pays a dependent’s pension).

For First Actuarial and advisers and administrators, the situation is easier too.

I like the sentiment from Lee French and from First Actuarial. It is important that we think of pensions as protection for those who live and life assurance as protection for those who live on when  the earner has departed.

 

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Should we have to turn pots into a pension? Sharp minds struggle with Bill Sharpe’s problem!

Posted on March 21, 2026 by henry tapper

For the past 10 years I have struggled with a pension pot that I cannot turn into a pension . I do not want an annuity, it is not a good deal.

I spent two years working with Pension Superfund to set up a Pension Superhaven , developing a pension scheme where folk like me could convert my pot into an occupational pension. Pension SuperHaven was a kind of pension superfund for  retail customers like me wanting a pension not a pot. We failed, it failed and customers like me still have no pension but just pots!

Here is L&G on the subject.

Building simpler retirement options with CDC

It simply shouldn’t have happened:-  millions of us finding ourselves at retirement with a pot not a pension.

L&G’s spokesperson is Jayesh Patel. Ironically, he finds his article beside the most popular article on Corporate Adviser! My argument  is that we should never have had pension pots in the first place!

Nice to see John Greenwood’s Pension Mutual report most popular on the Corporate Adviser site

The familiar answer to inadequacy is for us to save more but isn’t there another way?

The insurer’s answer is for us to better fund our pots better, “addressing under saving for retirement” is the expensive way but it does not resolve the problem.

The Government are saying that swapping pots for pensions using a whole of life CDC pension could improve the pension people get at retirement by up to 60%. Not only does that help people address under-saving (making the bar lower) but it addresses Jayesh’s problem at retirement.

Doesn’t the pot to pension problem needs to be resolved before we get to retirement?

I could not resolve the “pot to pension” problem with Pension Superhaven. It’s not going to be easy for DC schemes to give members pensions at retirement.  Jay explains how hard it will be for DC providers to get people like me to choose to swap  pots for something else.

Retirement is extraordinarily complex for members. At the same time as navigating profound changes in their personal lives, they must also manage a myriad of financial decisions: where to invest, when to take income or cash, how much to withdraw, how the state pension fits in, and how to avoid unintended consequences, such as triggering higher tax rates or losing entitlement to state benefits.

It’s no surprise that Nobel Prize–winning economist Professor William F. Sharpe described the challenge of turning a pot of money into retirement income as “the nastiest, hardest problem in finance”.  This is why there is demand for simpler income options at retirement.

There is another way than trying to turn pot to retirement income

Muntazir (Monty Hadidi) is head of Pensions at First Bus  head of  UK Pensions Strategy, Governance and Member Engagement.  He is quoted in this IPE article as staying open minded

His problem is that his large workforce are expecting pensions but getting pots and that is causing them a problem. The view he has is that CDC does not give people headaches with “pension pots”. For him, CDC pensions are accumulated over lifetime and are what people engage with.  He hints that in future that may be the way for people to swap pay deductions not for pots but pension!

Of course, cutting the individual pot out of the equation is difficult for commercial DC master trusts . It means unwinding 40 years of relentless pot-building  into pensions. That is the situation we have now and Monty’s asking for the UK to “stay open minded” to CDC so another generation doesn’t find itself with the problem I and my generation has!

I suspect it’s not just  Monty Hadidi  and Jayesh Patel who are waking up to Bill Sharpe’s “greatest problem”!

Monty
Jay

 

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Things that the FCA are doing to help people in retirement

Posted on March 21, 2026 by henry tapper

Jim Boyd is a firm advocate for those in later life, here he is explaining how the FCA is helping (thanks for pointing us to Jim, Tom McPhail)

I am of a generation who has used a later life mortgage to ensure the happiness of my parents and my wider family. I had Jim Boyd’s help and encouragement to do this and know that he is doing great things on the debt side, to enable those with property but little liquidity to live decent lives as they get really old. I was helped by an advisor who understood our family’s problems and by an insurer (Aviva) who have been excellent.

 

Thanks to the Equity Release Council and  FCA for the help they bring to the elderly with equity in property

The FCA run a well regulated market and are looking to go further.

Here is the first part of the study into later life mortgages, which I can recommend to people with the issues my family had. Tom , Jim and Nikhil Radhi, thank you. I include here the introduction and market overview (sections 1 and 2 respectively).

 

Introduction

Market overview

 

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The Pensions Mutual CDC proposal – Will Hutton

Posted on March 21, 2026 by henry tapper

Will Hutton – political economist.

Within 12 months British employers will be able to work together to provide pensions for their staff through CDC pension plans

I support Henry Tapper and the founders of Pensions Mutual who will make it easy for employers to provide staff with pension at a fixed cost.

The Pensions Mutual they have created is a multi-stakeholder cooperative society incorporating many of the principles that I hold dear.

Its mutual structure allows it to become majority owned by the employers participating. It gives them input to the management and investment of the scheme and it allows them to benefit from participation as farmers do from dairies.

The aim of CDC is to make pensions simple and cost effective. I am impressed that Pensions Mutual is inclusive of bright professionals who have clarity of what is needed to deliver to the market a CDC product that can be authorised in 2026 and available to employers early in 2027.

The CDC scheme they are planning has already promises from employers of assets from transfers and future contributions and I have no doubt that an open pension that can neither be in deficit or surplus will be able to invest for the long term in real assets in the UK and abroad.

From an economic point of view, Pensions Mutual is a way to deliver what pensions have been missing this century, a clear sense of purpose.

I am impressed by their wish to embrace new technology to deliver service to employers and their staff to the standards now expected. They talk of a new way of working since AI has become available. As a new enterprise they are well placed to benefit from the opportunity.

So I see this venture as worthy of your attention and investment. That investment can be of your time and expertise, your defined contributions into pensions or the investment of your capital. It may be that you want to invest in all these ways.

I hope that you can move forward with Pensions Mutual in 2026 and that in 2027 and beyond, you will be part of its operations

 

Will Hutton

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“Well said Maggie!” An elderly trustee chair speaks out for Maggie Rodger, the AMNT and independence

Posted on March 20, 2026 by henry tapper

PensionsOldie has spoken out in a comment to my blog on trustees being for members not just compliance

The reference to Maggie’s Farm does not refer to Maggie Rodger but to the rubbish workplace that Bob Dylan imagines himself in because there is no one standing up for him!

We can all feel that way when it comes to our pensions and I hope that that will change when Mutuals return and they are run by trustees that are  enthusiastic about what they do.

Well, I try my best to be just like I am
But everybody wants you to be just like them
They say, “Sing while you slave,” and I just get bored

Pension Oldie’s comment

When I first became a Secretary to a Trustee Board in the mid 1980s I was advised that the first key duty of a Trustee was to act in the interest of members, the second key duty was to question and challenge their advisors and not just to rubber stamp advice.  These messages appear to have been lost over the following decades and replaced with a group think mentality and regulations that have embedded a belief that consideration of members’ interests must be solely determined by an analysis of risks.

I strongly belief that it was this false risk dominated approach that has resulted in many DB pensions schemes giving away a third of their assets by adopting an LDI investment policy or buying bulk purchase annuities based on a negative real gilt yield.  What was the real downside risk which these arrangements were promoted as protecting against; when the pricing was based on the assumption that the scheme would if continuing without the LDI or buy-out “protection” would have real investment losses (at say 2% p.a.) in every future year?  Similarly is it currently in the Members’ interest in a scheme in surplus to pay the insurance company premium to buy out liabilities at little more than PPF level benefits?

In Mastertrust DC and CDC do we have, or will have, Trustees who will have the courage of their convictions to sack the asset manager, scheme provider or owner, if they believe it is the members’ interest to do so?

We do need trustees, in both DB, DC, and CDC schemes who are not conditioned by training or experience in the status quo and a fear of deviating from the norm.  Member nominated Trustees are an important protection but we must ensure that Trustee boards are not dominated by those whose training and experience limits their perspective.

Although I have relevant profession qualifications, am paid in the role, and have decades of pension trustee board experience, I refuse to categorise myself as a “professional” trustee.

You can see all comments on this post here:
https://henrytapper.com/2026/03/19/trustees-are-for-members-not-just-compliance/#comments

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So you think that your pension was bought out by a gilt-edged insurer?

Posted on March 20, 2026 by henry tapper

All year I have been writing about the security of buy-ins and buy-outs of occupational pensions in the UK by insurers. I am talking in particular about our insurers that are shipping off assets and liabilities to the USA and Bermuda so that the liability to pay us is swapped from UK regulated funds (backed by the PPF) to what the FT is now calling the “Private Credit Binge” of top rated bonds. These top rated bonds are yielding such large amounts that insurers do not need to hold so many of them as they’d have to hold UK corporate bonds and gilts.

To understand the explosion of these new kind of bonds, the ones that back the bulk annuities that pay us like a pension, here’s a chart from the  FT article that I can offer on a free link here.

 

I am out of my depth on fully understanding the mechanics of turning a safe fund into a holding of these “Rated feeders”, but here’s the FT explanation

Let’s begin at the beginning

It’s that last paragraph that has made these rated feeders and CFOs help American insurers clean up buying into and buying out UK pensions. But that’s where we should be concerned. Our pensions are easy meat for US private equity

But “easy” doesn’t mean secure and the names of the big private equity firms who now own insurers such as Just are listed below.

You think you are out of trouble when being bought out by an insurer?

This whole business of rating the value of debt is based on “track record” of the debt managers and it’s worse than that.

So there you are. Our bought out pension money’s being held by insurance companies that really have no idea what’s going on.  Call that “gilt edged”?

 

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