AgeWage submission to the WPC on Pension Transparency

I am submitting evidence on behalf of AgeWage, a company set up to help people work out if they are getting value for money from their pensions (and pension advice).

I am a Director of First Actuarial and Founder of Pension PlayPen. I appeared before the Committee with BSPS members as part of the Pension Freedoms Enquiry, I blog as the Pension Plowman at

AgeWage wishes to submit evidence because its founders, (myself, Ritesh Singhania and Dr Chris Sier) believe that transparency is the best disinfectant to clean up pensions tarnished reputation.

Contained in our response and the blogs that expand it is a blueprint to make pensions and pensions advice more transparent.

Our response to the enquiry is set out here. Longer responses are available via links to blogs at the end of each section or by searching

  1. Higher-cost providers don’t generally deliver higher performance, and usually eat into clients’ savings. So long as we have the right data and the means to analyse it, we can answer that question “fund by fund”, “product by product”.  The aggregate of all the answers will eventually enable us to generalise. There is no short cut – the task is massive but it is one that is within the compass of data scientists and one that the pensions industry could and should undertake, more about our view here.
  2. The Government is doing a good job ensuring that workplace pension savers get value for money. The responsibility for making workplace pensions work, is all of ours. We should be relying on Government to create the framework, we should adopt best practice as a matter of course, more about why we think so here
  3. We see regulating providers as more important (for Government) than empowering consumers. We need better products, products first – empowerment second. – You Should not empower people to make good use of poor products. The regulation of pension products for auto-enrolment by both FCA and tPR has been a success – they’ve kept a proper market going, driven away the crooks and it looks like we’re moving towards a future where we can draw our pensions collectively. More of the same please! A fuller explanation here
  4. We see three ways to encouraged savers to engage with their savings either we can convince people to engage directly with their investment, or we can get people to engage with stewards or we can offer digital engagement. But we should be wary of ever expecting most people to pay much attention to their pension, most people just want to “know where to sign”. Find out more here
  5. Investment transparency is more important to savers than they know (or experts are prepared to admit). People cannot be expected to know the unknowns. The onus is on those expert in pensions to make pension investments clear and comparable. “Value for Money” is a way of thinking about what we have, which makes pensions easier to understand and manage. We explain this here.
  6. If customers are unhappy with their providers’ costs and investment performance/strategy, there barriers to them going elsewhere. Currently the system is set against people moving. It’s hard for people to know whether they are being penalised for moving, so in the absence of good information, they tend to stay where they are. This tends to reward the bad pension providers. More information here
  7. Independent Governance Committees could be a lot more effective in driving value for money. We’ve analyzed the performance of over 20 IGCs and the odd GAA over the last four years. We think they suffer from poor recruitment and that they do not get to their members to find the real issues. They’ve done good things in ensuring providers cap charges and can do more in ensuring data flows to dashboards. We explain more here
  8. Do pension customers get value for money from financial advisers who provide financial planning. Value for money from wealth managers is not so easy to find. We see plenty of product bias in the advice given by wealth managers and it looks like recidivism to a pre-RDR world. Those advisers who offer financial planning tend to have clearer charges which people understand. We explain the differences here.

We see a groundswell of support for Pension Transparency, evidenced in the work of the Transparency Task Force. We call on Government to recognise the Zeitgeist and support the work of Andy Agethangelou and his advisory committee.

We see Pension Dashboards as a way of bring transparency to ordinary people. We do not support the provision of a single dashboard but urge the committee to promote the conditions in which the private sector can give people access to their pensions and the information they need to manage them.

We call on the pensions industry to exert itself to help the 10m new pension savers who have arrived through auto-enrolment. Equally we call on Government to ensure that they have pension options when they mature, fit to retire on.

Henry Tapper

August 9th 2018

Posted in pensions | Leave a comment

Do pension customers get value for money from financial advisers?


This is the last of eight blogs I’ve written in response to the Work and Pensions Select Committee’s inquiry into Pension Transparency.

Today’s exam question is

“Do pension customers get value for money from financial advisers?”

and the quick answer is “rather more than they used to, but not as much as they should”

Pensions advice is a 60 year war over value and money

If the Horrible Histories did “pensions financial advice”, these would be the memorable dates

1961 Mark Weinberg set up Abbey Life and Unit Linking

1971 Mark Weinburg set up, Hambro Life and 20 years later St James Place). The direct Salesforce replaced the man from the Pru.

1988 – A-day; pensions advice was polarised between independent advisers and direct salespeople

2001 – Government started regulating product charges with Stakeholder Pensions

2012 – Government completed Retail Distribution Review  and stopped commission

2014 – Pension Freedoms allowed pensions to be considered as wealth management

I was a regulated adviser from 1984 to 2005 and ran my own practice for most of that time. I’ve worked with great advisers (John Ottensooser) and some crooks. I don’t paint myself as a saint but I know my way around.

I would characterise the past 60 years as a battle between advisers and consumers for the ownership of value and the extraction of money.

Financial advice polarised between financial planning (IFA) and wealth management (WM)

My experience of financial advisers today is split between a few financial planners and rather more who help manage wealth.

In general those who provide financial planning are struggling to make a living, earn their money from transparent fees and are doing a great job.

Those who provide wealth management are living on easy street, being paid from the funds on which they advise with little margin pressure.

It would be wrong to polarise the groups, wealth management subsidises financial planning and many advisers have feet in both camps.

The perversion of best advice by adviser remuneration

You have to be “senior” to remember the concept of “best advice” but there was a time when people aspired to do the best for their customer and to charge appropriately.

But the concept was always challenged by the difficulty advisers had in getting paid. The system of commissions that was pretty well universal before the RDR in 2012, was recognised as conflicting advisers who were seen to be favouring solutions that paid them the most.

Six years after the implementation of RDR – I read an article in the IFA trade press, innocuously entitled Sipps overtake annuities and drawdown as advisers’ most-wanted platform product.

The article reports findings of a survey of IFAs and the products and platforms they choose.

It shows full Sipps have risen to the top of financial adviser wish lists for the most desired products on platforms as demand for annuities and income drawdown recedes.

A quarter of respondents say they would most like to see full Sipps and other complex pension products on platforms

What is driving this thirst for complex pension products and the platforms to launch them?

The top three satisfaction drivers on main platforms are adviser remuneration features, reporting capability and retirement advice/services

Note the absence of this report of anything to do with “better outcomes for customers”.

Complexity is only beautiful in an asymmetrical world

The FCA in their recent work on the platforms that advisers now use – noted how since RDR – complexity had increased. Here is their pictogram of the Pre RDR advised platform

Sipp 1

and here is the new value chain.


The second “solution” is what Money Marketing calls a complex pension product. The FCA’s point is that non-workplace pensions have morphed into considerably more complex products which deliver “adviser remuneration features, reporting capability and retirement advice/services“.

In practice, the retirement advice/services piece is (cash flow modelling)  is paid for by directly charged “adviser” charges and indirectly by profit sharing on the annual management charges from the other participants.  The new SIPP has become a fully bundled product that drives the Wealth Managers business.

It is often hard to work out the “money” element. Steelworkers who signed up for SIPPs through Active Wealth Management were able to quote disclosed charges for one or maybe two of the boxes, but quite unable to work out the total cost of the services of the Fund Administrators (Gallium), DFM (Vega) , Fund Manager (Newscape) let alone the costs of the ultimate asset managers within the Newscape fund.

This may be a notorious case and not typical, but the problem of complex relationships between multiple agents is endemic in the complex pension products being used today by wealth managers. The complexity is making it all but impossible for ordinary investors to assess what they are paying or indeed getting for their money.

The solution is so complex that only the adviser understands it. This causes  precisely the asymmetry of information between buyer/seller, that has been noted by campaigners for transparency as the “value destroyer”

The Wealth Managers must simplify what they are doing .

There are simpler solutions out there. The article mentions annuity and drawdown. These are relatively simply products with little opportunity for wealth managers.

I need to explain that most pension savings product allow people to draw cash from them using the various options introduced by the pension freedoms.

These options are fit for the purpose of most people, but they are ignored.

The steelworkers in Port Talbot almost all had access to workplace pensions from which they could have drawn down at less than 10% of the costs of the complex SIPPs that were set up for them. But these workplace pensions did not have the convenience of “adviser remuneration features, reporting capability and retirement advice/services”.

Hope for the future

The past twelve months have seen a polarisation between wealth managers happy to live off the massive inflows of wealth from defined benefit schemes and well funded DC pensions, and those who consider themselves financial planners.

The events in South Wales typify this polarisation. It is good to see that a healthy proportion of senior advisers have demonstrated the highest ethical standards in the restitution work being done for steelworkers and others and no compliments are too high for those who have given their time freely to “Chive” (the restitution and guidance service set up by Al Rush).

Nevertheless, it is now clear that the majority of the £36.8bn that transferred out of occupational pensions last year, found its way into complex SIPP products and that a good proportion of it is not offering Sipp holders value for money.

The curse of product bias has returned, except now the bias is into such complex products that sometimes even the advisers lose touch with the money spent on intermediation.

The hope for the future is with Chive and with the FCA and tPR who are beginning to get to grips with the advisory problem. If we are to move forward in hope, it is because of the professionalism of the new model of advisers who are better qualified and better intentioned than at any time since 1961. But that means ridding ourselves of the recidivist practices that are dragging us back into the bad days – pre RD – when products perverted advice.rdr


Posted in pensions, WPC | Tagged , , , , , , , , , | Leave a comment

Do IGC’s improve our value for money?

value for money

This is the 7th and penultimate blog , addressing the Work & Pensions Select Committee’s questions on pension transparency. This time the exam question is

Are Independent Governance Committees effective in driving value for money?

My short answer is that – for the money they have been given – they could do a lot better.

On the composition of IGC boards

In as much as…

  • IGCs have become an effective diversifier of revenue streams for firms of independent trustees.
  • IGCs are successfully integrated into insurance companies business as usual procedures
  • IGCs offer an alternative to trustee and non-executive roles for those seeking “portfolio careers”

IGCs are failing.

For too many IGC board members, the diurnal tedium of later life is alleviated by days out at insurance company expense, IGC boards are full of the wrong people – people who are too old, too male and too steeped in the failings of the past to understand the opportunities of the future,

After blogging a complaint about the ineffectiveness of the L&G IGC, I was called into L&G’s office to have it explained to me (by senior executives) the factual inaccuracies that underpinned my criticisms. Neither or the supposed inaccuracies resulted in me changing my mind or my blog, I maintain I was right.

At the end of the meeting (lecture), I mentioned that under the terms of my contract, I was now free to be an IGC member. The L&G execs thought I was joking  – I wasn’t.

The fact is that people who are genuinely interested in transparency are not getting onto IGC boards. Instead IGCs are being packed with “trophy” members who appeal to the vanity of the insurance boards, but who have neither the energy or the motivation to genuinely shake the tree.

It would appear that the open place at the L&G IGC will be filled by a “big-hitter” – or so the executives would have me believe. I thought “more trophy”.  I expect L&G are spending a lot of money getting big hitters to the IGC board, but the recent output – in terms of effective governance – has been poor.

By comparison, an IGC with a relatively small budget , like that of Phoenix, seems to be consistently punching above its weight. It strikes me that the Chairs of IGC boards are critical to their success and that many boards have chairs who are not up to the job.

On the effectiveness of individual IGCs

Each year I read (at least once) around 20 IGC reports and a further 10 or so GAA reports. Some of the GAA reports are very important (that of St James’ Place in particular-why a pension provider with £90bn under advice doesn’t have an IGC is a mystery).

Each year I mark the reports and publish the scoring. I blog my reasoning and I know that many of the IGCs read these blogs. In the absence of much feedback elsewhere, my blog has become a part of the reporting season. Here is the table of the reports I have done since the inception of IGC reports in 2015-16.

IGC review 2018 full

If you’d like the live  spreadsheet – of which this is a picture – mail

There are IGCs which are effectively reporting. Probably the most effective – consistently – is the Prudential’s. Some IGCs are getting more effective (Royal London) and some are slipping back (L&G). Some are consistently average (Fidelity) and some are consistently poor (Black Rock).

As we consumers have no other way of assessing the IGCs than reading their reports, we must take the reports as a proxy for the IGC’s performance.

IGCs are invisible to the people they serve

I don’t know if the FCA do polling on IGCs, but I’d be surprised if much more than 1% of those in workplace pensions know what an Independent Governance Committee governs.

In its recent inquiry into pension freedoms, the Committee chair had the chance to look at how the British Steel pension management and trustees related to their members. He concluded that the two were in different countries. I suspect that the pension management assumed this to mean that being Scottish, they were too distant from the steelworkers in Wales. I took this to mean that the members of BSPS were sorting out their issues on Facebook – while the management and trustees were devising a paper based communication plan.

The same can be said of IGCs, they are in a different country from their members. Members are spending their time getting information from Facebook and Instagram. Younger members get news from Snapchat or Buzzfeed. Static websites are seldom if ever visited. The work of the IGCs goes un-noticed by all but a handful of policyholders.

The efforts of the IGCs to talk to members are pretty well non-existent. In 2015, L&G decided to run a member’s forum, but the only people who show up are advisers and industry commentators. Some (like me) happen to be L&G policyholders but this is incidental, ordinary members are not going to go to the City of London in the middle of a working day to be lectured about the value of their workplace pension.

If IGCs want to enter into a dialogue with members , they should be looking to create digital forums like the Facebook pages of the British Steel Pension Scheme. They could do this by working with large employers to create employer specific forums and with smaller employers to create multi-employer forums. IGCs will become relevant – when they become visible – right now they are invisible which suits insurers very well.

IGCs can remain low profile – so long as they understand the issues.

My recent complaint against L&G’s IGC, was that it turned a forum into a lecture. those people who had turned up , came clutching questions and the meeting had 10 minutes out of 120 for Q&A.

IGCs have not yet established mechanisms to hear first hand from either members or their employers. When it comes to the nuts and bolts of  auto-enrolment and workplace pension saving, the IGCs therefore have to guess at the issues, or be guided by large employers – who have available resource to have individual meetings with the IGCs.

In Britain today, we have over 1m participating employers in auto-enrolment, but all but a handful are excluded from the IGCs knowledge and understanding.

Do IGCs understand Value for Money?

The import of the IGCs failure to engage with the policyholders and employers they represent, is that they have no real authority. Unlike Unions who speak for their membership, IGCs can speak only for themselves.

Unless they have clear evidence of what their members want, their lobbying for change will be seen by shareholders as spurious.

As for their task of telling members whether the members are getting value for money, I can see no evidence that the IGCs have any consistent measure for what value for money is.

The Prudential use an outcomes based measure that looks at fund performance against an inflation related benchmark. Others appear to be using performance aligned to the costs members are incurring and others use less quantitative measures, relying on independently managed surveys carried out by marketing companies.

In three years – only one IGC – has told its insurer that it is not giving its members value for money (or at least has committed this to an IGC report). That IGC was that of Virgin Money in 2017-18. By and large, the reports conclude with the Chair affirming that in the Committee’s opinion “xyz” has delivered value for money.

What kind of benchmark is being used is not clear. It is like the a football club chairman saying that in his opinion his club was worthy of promotion.

Until some proper system of benchmarking is in place, insurers will (as old Mr Grace would say) – “all do very well”.

Do IGCs deliver value for money?

Charged as they were by the FCA , with implementing a cap of 1% on exit charges from workplace pensions , the IGCs can take some credit as enforcement agents. Incidentally the Virgin Money report was focussed on the failure of VM to deal effectively with this issue.

But in terms of measuring value for money on default funds of workplace pensions, the primary duty of IGCs, they are failing. Many have yet to understand how much the defaults are actually costing members, not having been granted the means of testing hidden costs and charges by the insurers they are paid by.

If this persists into the 2019 reporting, then I hope that those IGCs who still (after five years of trying) , have yet to have this basic data, will report their insurers to the FCA as Virgin Money’s did.

As regards “value”, IGCs who persist in confusing “member experience” with “member outcomes” should be reported to the FCA for dereliction of duty.

It is all too easy for the marketing departments of insurers to pull the wool over IGCs eyes with talk of “portals” and “member journeys”, “modellers” and “Gamification”, but this is all cheap to deliver smokescreen.

It is time that the policyholder is given a clear value for money score on their workplace pension as a whole, with evaluation of the plan’s capacity to deliver “to and through” retirement and an assessment of the risk adjusted performance of the plan in one holistic number. Anything more complex will simply not make sense to members.

By reporting simply and holistically against clear measures, we may be able to start comparing one workplace pension’s VFM against another.

IGCs cannot in themselves – improve the member’s VFM. But they can put pressure on insurers to lower charges, improve funds and make it easier for policyholders to save and spend their money.

In order for them to do this they need to demonstrate they represent the authentic voice of the policyholders, they have a proper view of what they consider value for money and that their assessment is based in quantitative fact and not in the eye of the insurance company’s marketing department.





Posted in pensions, WPC | Tagged , , , , , , , , | 1 Comment

How easy is it to leave a bad pension plan?


This is the 6th of 8 blogs I’m writing which address the questions asked by the Work and Pensions Select Committee.

Today’s exam question is

If customers are unhappy with their providers’ costs and investment performance/strategy, are there barriers to them going elsewhere?

The quick answer is “perhaps” , but it’s pretty hard to know if there are or aren’t!

It is usually very easy to leave a good DC plan and hard to lose a bad one. The bad ones need to put up barriers to entry and the good ones don’t.

When Quietroom got its first appointment it was with the Halifax, who claim Quietroom saved them £400m in outflows by making it easy for customers – panicking about Northern Rock – to withdraw their savings. In practice, putting up barriers was just making savers panic more!

Sadly, the same mentality that demands high charges from customers, demands those charges be crystallised on exit. The FT report (August 6th) that “investors are charged hundreds of pounds for …SIPP exit fees”.  The FT reports ”

“Exit fees force customers to pay each time they move an investment to a rival provider. The Financial Conduct Authority has proposed banning such charges due to fears that they deter customers from switching”.

These fees are for “in specie” transfers too!

By comparison, moving money from one workplace pension to another is usually “free”- (though you might lose a little on some hidden spreads).

As well as the cost of moving money from one place to another, there is the hassle-factor. The FT reports that some SIPPs can take over 100 days to transfer. I haven’t seen evidence that it takes quite that long, but the Pension Bee Robin Hood Index shows that there are huge differences between good and bad providers, in the time it takes to get the money from one place to another.

This entitlement to keep your money, extends beyond the bad guys. NEST, who are in many ways good guys, told us they were negotiating with Origo (who do the clearing between pensions) so that they could get money into NEST quickly. They hadn’t considered negotiating with Origo so customers could get the money out quickly!

Customers should be able to move freely and easily

As long ago as the late 1990s, the Stakeholder Regulations made it possible for anyone buying a stakeholder pension , to be able to move from or to that pension without charge (from the stakeholder pension).

This simple rule has been inherited by workplace pensions today. People who enter a workplace pension cannot be charged on the way out. They cannot (since active member discounts were banned in 2014) be charged more for being a deferred member of an employer’s scheme). In other words, those pensions which are governed by tough regulation, provide people with safe harbour when it comes to leaving and joining.

By comparison, those pensions that are not strongly regulated, especially those that the FCA call “non-workplace pensions” are able to do what they want. At the most extreme level, the offshore scams can be little more than Ponzis with it being pot-luck as to what you get out. Typically – if you’re first in the queue, you’ll be most likely to get a pay-out.

But the number of these dreadful schemes is few and thankfully, getting fewer as the impact of successive anti-scamming campaigns begins to be fealt.

What is much more worrying, is the way that SIPPs can invest in what appear to be legitimate investments which have clauses written into the small print, which allow – legitimately, the fund to impose an exit penalty – typically a tapering penalty which reduces to ensure a minimum charge has been taken (on early redemption). Such fees can be fund specific and even share-class specific. We found that some shareholders in Newscape funds, invested through Gallium by Active Wealth Management were clean of these charges, and some not. What was clear was that the people buying into these funds had no idea what the cost of getting out of them were. Even the experts struggled to find that out.

This business of tapering exit penalties, gains legitimacy from the practices of large and legitimate enterprises.  Perhaps the most notable example of which is St James Place – which levies ratcheted exit penalties on many of its policies. These fees are explained as a means of ensuring that the costs of setting up the policies is recovered, though these fees are typically levied on the whole fund, rather discrediting the argument (surely adding an extra 0 to an investment does not mean the fees increase by ten!)

Less legitimate outfits are able to point to SJP as a precedent. I think that there is no grounds for exit fees – a view echoed by Mike Barrett of the Lang Cat in the FT article

 “Exit fees should be scrapped. It is widely expected that customers will want to move at some point. Putting a barrier in place to do so feels unnatural. The world has moved on [from exit fees] and platforms need to catch up with the way other services and industries are operating.”

Sadly we cannot move on from exit fees – quite!

In 2016, the FCA required all insurers to reduce exit penalties for those 55 or over to a maximum of 1%. Some – like Scottish Widows – went further – and scrapped them altogether. I was 55 in 2016 and was able to be one of the first to benefit. My Allied Dunbar 226 policy went up in value from around £5k to £9k. I moved it as soon as the transfer value increased.

How many people know about this? I did a straw poll at a recent Pension PlayPen lunch, not one of the ten people there knew – and one was the Chair of the Transparency Task Force!

If you are under 55 – you cannot be sure if you have exit penalties on your legacy policy or not.

The other man’s grass is not always greener

Even if you are over 55, you need to make sure that in switching you do not lose valuable benefits in your policy. These can include life cover , waiver of premium, with-profit terminal bonuses, contractual loyalty bonuses or ultra low charges for the final years of your plan.

All of these clever features come down to the incentivisation by pension providers of loyalty. Many of them are very valuable and it is entirely understandable that these providers built them into your policy, they want you as a lifetime customer and these positive barriers to entry need to be weighed against the possibility that the other man’s grass is greener.

This suggests that nobody should take a transfer unadvisedly.

I find this barrier to exit entirely unacceptable! Weighing up the pros and cons of what you’d lose by staying against what you’d get from staying should not require an adviser.

If the insurance industry tell you it does, then you should ask them why?

There is no reason for a savings plan, for which the member is taking the risk, not to be transferrable. There is no reason why an adviser needs to be employed to move it.

If an insurance company wants to employ an adviser (at its expense) to help in the decision – so be it. In my view – few will.

I caveat this with the exceptions (proving the rule). It may  be that what looks like a DC pot – is in fact a DB promise; this can happen when the pot is underpinned by a guaranteed minimum pension or offers guaranteed annuity rates. In such cases the rules governing DB transfers are helpful. When in doubt – do nought! Take advice if you can afford it , otherwise – if it says “guaranteed” – stop!


We need to find simple ways to help people make decisions to stay or go and they need to include an assessment of the cost/benefits of moving money. My simple solution involves the colour of the value for money number. Here is my idea value for money assessment.

age wage simple

You will notice that the score is in green. In my world green scores indicate that the policy is good to go! If I had put that screen in red, it would have said that the policy should stay where it is.

This system relies on conviction from the people doing the scoring and the co-operation of those giving data to the people doing the scoring. It does not rely on financial advice.

It may be that someone who gets a red – wants to know why. It may be that the red goes green when the person reaches 55 – or the end of the contractual term or some other point. But this can be explained at a high level through guidance.

We should not make the need for advice a barrier to exit – on our DC savings.

Posted in pensions | 8 Comments

How important is investment transparency to savers?


This is the 5th of a series of eight blogs addressing the eight questions posed by the WPC.

Today’s exam question is

How important is investment transparency to savers?


A short answer is ” a lot more important than most people think!”

Lord make me transparent – but not yet!

I remember going to an event with Dr Chris Sier in a posh hotel in Hampshire. Dr Sier explained why the work he was doing on investment transparency was important. Almost universally , he was derided as being a crank “clients just aren’t interested” one IFA told the audience. Following Dr Sier was Mark Fawcett , CIO of NEST who confirmed the work Dr Sier was doing was important. Dr Sier, who was on the panel asked Fawcett – to demonstrate the transparency point – to tell the audience what NEST was paying for its asset management. Fawcett had to admit that he couldn’t – he had put himself under a non-disclosure agreement.

The story illustrates the two reasons that investment transparency hasn’t yet happened in the UK

  1. Because a lot of people don’t want it to happen (and use people’s ignorance to claim it doesn’t matter)
  2. Because those who could drive transparency find themselves conflicted

Neither reason is good reason,

Why investment transparency matters.

Yesterday, thanks to a tip-off from an insider, I read Hargreaves Lansdown’s preliminary report on its 2018 numbers. Here is what I found

Net revenue on Cash increased by 15% to £42.1million (2017: £36.6m) as increased cash levels offset a slight decline in the net interest margin to 48bps (2017: 49bps)…. cash accounts for 10% of AUA

Of the £90bn Hargreaves Lansdown has on its platform- around 10% is in cash and Hargreaves Lansdown are retaining 48% of the interest earned on that cash for themselves, trousering a cool £42.1m in the process.

The pillage doesn’t stop there, here is the full post , showing how HL intend to increase margins to 60-70 % this year – HL (rather than investors) benefiting from interest rate rises.

Net revenue on Cash increased by 15% to £42.1million (2017: £36.6m) as increased cash levels offset a slight decline in the net interest margin to 48bps (2017: 49bps). This was in line with our communicated expectations at the Interim results announced in February 2018 that margins would be within a 40 to 50bps range. Cash accounts for 10% of the average AUA (2017: 11%). At the start of the year the Bank of England base rate was 0.25% before being increased to 0.50% in November 2017. With the majority of clients’ SIPP money placed on rolling 13 month term deposits, and non-SIPP money on terms of up to 95 days, the full impact of the rate rise takes over a year to flow through. Following the base rate change to 0.75% on 2 August 2018 and assuming no further rate changes, we anticipate the cash interest margin for the 2019 financial year will be in the range of 60bps to70bps. Cash AUA at the end of 2018 was £9.6 billion (2017: £8.1bn).

This is to be found embedded in the shareholder report, in other words – the way that it boasts to the City. You won’t find that number being boasted about to SIPP holders.

It’s all about who has the knowledge

Long term investment depends on fractional charges which can , over time become hugely valuable. Hargreaves Lansdown haven’t always had £90bn under management, they’ve got to where they are by offering a great service -as has St James Place (HL’s principal rival for the nation’s “wealth”.

But there success is built on trust and on knowledge sharing. Hargreaves Lansdown’s clients are among the best informed in the industry. HL has pioneered systems of assessing funds and making fund selection easy enough for people to do it themselves. As such they are a model for “direct investment” – something which is hugely important in getting investment as a recent blog explains.

But all this stuff on funds can be a smokescreen. If you are pocketing 48% of the interest on non invested money, you are profiteering on people’s indecisiveness and deserve to be called on it. Taking half of the interest people should be getting on their savings – just for having that money on your platform – is daylight robbery!

How transparency helps the consumer

I will be sending this blog to the Chairman of the Hargreaves Lansdown IGC for this thoughts. I hope he will be asking Peter Hargreaves and Stephen Lansdown for theirs.

If the opinion is that HL have been caught with their trousers down, I will expect to see next year’s target for the “cash bulking” to be rather lower than the 40-50% in this year’s accounts. If HL see this as “treating their customers fairly – and the IGC agrees”, I will refer the matter to the FCA. If I have totally misunderstood, I will of course apologise!

The same document offers other gems as boasts to shareholders. Look at the net revenue margin on their manager of manager funds – 74bps . The OCF of these funds is 134-144bps and that doesn’t include the platform charge of 45bps!

There is nothing illegal with having 50% margins on your activity, but if the total costs of your fund (including platform charge) is 2% pa, then it’s pretty hard to see how – in a low growth environment, these manager of manager funds , are likely to deliver decent outcomes relative to simpler less expensive fund structures.

Showing the customer what they are buying

The consumer needs to know what they’re paying. If HL can show value from its manager of manager funds that can justify a 2%pa holding charge, then I will supply them with a value for money that will reflect it. age wage simple

Finding the ways that investment manages and platform providers extract value from your investments is a forensic task and not for the faint-hearted.

Dr Chris Sier has been ridiculed for ten years, but now he has been taken seriously by the FCA and his template is now being adopted by the FCA and will soon be adopted by institutional investors keen to know what they are really paying.

Extending that work into the retail space has been the province of two other pioneers, Alan and Gina Miller.

The Millers and Dr Sier have discovered in the retail and institutional spaces, that the same thing is happening. The true cost of managing your money is often considerably higher than what is disclosed in the brochures you read when you invest.

Relying on providers to disclose their costs has meant that many of the costs we actually pay, are hidden. These hidden costs have often been claimed not to exist. Famously, the Investment Association put it about – two summers ago, that these hidden costs were like the Loch Ness Monster.

The IA have since withdrawn this comparison and have even agreed to work with Dr Sier on the FCAs Institutional Disclosures Working Group, from which a template has emerged that will allow us to see what we are paying in charges, over and above those stated in the brochures.

Hopefully, Dr Sier will be able to help people like me to show customers of Hargreaves Lansdown what they are paying compared with what they could be paying within NEST or other SIPPs – and what value they are getting for their money.

Even more importantly, the millions of us who have an estimated £400bn in what the FCA call “non-workplace pensions” – will be able to see what the value for money on these plans actually is.

So long as you remain invested in a pension plan – you are buying its services. In answer to the exam question, understanding the investment costs and the investment value of what you are buying is of continuous importance. If you are finding you are being ripped off, you have the right to withdraw your custom, if you find you are being treated fairly, you have the right to bring money to your fair provider and have them pay you your money back in retirement.

The basis for decision making on how you organise your money going forward, must be based on a proper analysis of what your options are. Without accurate data on the costs and charges and or risk-adjusted performance of the investments you are currently making, how can you hope to make optimal decisions?

A word on the dark web of hidden costs

What goes on within the funds into which we invest has been a secret for as long as I’ve been investing (since 1979).

But the template that Dr Sier and the FCA IDWG has produced, will tease out the hidden costs of fund management exploring everything from bond  to foreign exchange spreads. It will look at the costs of trading, of research costs charge to policyholders and it will explore many other devious costs that eat away at your money.

Already, some of these costs are being published. The last round of IGC reports showed that most workplace pension defaults have hidden (transaction) costs below 0.05%. But there were outliers. This is an extract from the Fidelity IGC report

fidliety IGC

Fidelity’s hidden costs are almost as high as Fidelity’s standard charges! They are at least ten times higher than the Aviva and L&G and Peoples Pension equivalent!

The IGC doesn’t comment on whether these costs are value for money. But if I was a Fidelity investor, I’d be asking the IGC just what I was getting for those transaction costs!

If we can continue to expose hidden costs, whether at Hargreaves Lansdown, or Fidelity of anywhere else, we can help investment managers to drive those costs down. If they cannot drive down costs and cannot justify those costs in terms of added performance, we can choose to take our money elsewhere.

Value for money scoring depends on getting accurate data on explicit and hidden costs. It also depends on getting accurate reporting on gross and net performance using what the asset management industry calls NAV to NAV numbers (net asset value) as well as the gross equivalent. This reporting exists, it is simply not in the public domain.

It’s been a long time coming – but change is gonna come. Within five years i confidently predict that consumers – whether retail or institutional – will be able to make decisions based on transparent reporting of the whole truth – including the stuff that only the shareholders get today!


We needs be vigilant

Posted in advice gap, pensions, WPC | Tagged , , , , , | Leave a comment

How can savers be encouraged to engage with their savings?


pension bee trust pilot

Engagement engendered by trust

This is the 4th of eight blogs considering the questions put to us by the Work and Pensions Select Committee.

WPC questions

Today’s exam question…

How can savers be encouraged to engage with their savings?

Quick answer; either we can convince people to engage directly with their investment, or we can get people to engage with  stewards or we can offer digital engagement. But we should be wary of ever expecting most people to pay much attention to their pension, most people just want to “know where to sign”.

  1. Direct ownership

People like owning possessions, but how many people would count their pension fund as their possession?

There are real problems with agency here. In practice very few people choose the assets into which their pensions invest, the complex array of intermediaries within a modern day SIPP, show just how far from the asset, the beneficial owner of the SIPP has drifted.


Source – FCA

“SIPP” stands for self-invested personal pension but in practice there is are at least five intermediaries between the investor and his/her money.

This perplexing complexity is the result of competing claims from each intermediary for hegemony in the client relationship. But in practice it is only the financial advisor who directly communicates with the investor.

If we are to get people back in touch with their savings, we are going to have to do something about these multiple agents. We need to get back to owning our pensions and that means having clear visibility about where money is invested.

People want to invest well

At a recent meeting of the Defined Contribution Investors Forum, Ignition, a communications company, demonstrated the frustration ordinary savers had , when wrestling with where their money was invested. A common thread to interviews was that people assumed their money would be invested responsibly. When they found that this was an “optional extra” they became agitated and even angry.

People do not expect to have their money invested in arms , or with polluters or in organisations that don’t behave responsibly to their staff, customers or shareholders.

In contrast , when investors were shown that they were invested in projects with a strong social purpose, they were proud, wanting to explore their ownership, eager to do more of the same.

Share Action have been making this point for many years. If we want to engage savers, especially younger savers, we need to get them involved in the story of their investments. We need them to be able to explain what they are doing to themselves and others.

But the problems of agency too often prevent this.

Share action report

The alternative way

Over the past four years I have been investing with Legal and General and am proud that I am now investing my workplace pension in a fund called Future World,  I am an evangelist for this fund which was created for HSBC’s staff pension scheme by people I know and trust. I am a fortunate person in that I have a clear understanding of the who, how and why my money is invested.

Not only am I invested in it, but my 20 year old son is also investing his meagre earnings in this fund, so are many of my friends. I was really delighted when Pension Bee, who offer a simple SIPP, offered this fund to their investors. I’m proud that one of our clients, RSPB, now offers this fund as part of its default for workplace pensions.

The  fund does good things with my money and I am really keen to see how my future contributions are invested. It is fair to say that a really well invested fund, has excited me to save more.

Seeing what is going on

They haven’t done it yet, despite promising me they would. Nigel Wilson and John Godfrey – who are two of the bosses at L&G want to put the investments of L&G on google maps so that as I travel around Britain, they can spring out at me and remind me of what I own.

This – in extreme form – is what I want. Everyone I tell about this get’s excited by the idea.  So why hasn’t it happened yet?

I reckon it’s because companies have become terrified of their customers. Legal and General regularly tell me how I – as an adviser – can have access to all kinds of information that adds value to my relationship with my clients, but when it comes to my own investments, I am constantly confronted with warnings that I am not a professional investor and that I should talk with a financial adviser before making any decisions.

I found this problem when I was in Port Talbot. Many of the steel men I spoke to told me that they had workplace pensions with Aviva (Tata’s auto-enrolment supplier). When I asked them why they didn’t use their workplace pension for the investment of the transfer they were taking from their DB plan, they looked perplexed. Not one of them had had this option discussed with them by their financial adviser. Instead they had ended up in SIPPs of the type advised above.

Once again we are allowing the complexities of intermediation to get between us and our savings. Had these steel men invested in the GPP, most would have paying well under 10% in terms of charging, and they would have had direct access to information on the funds into which they invested.

I am coming to the conclusion that nobody, not the intermediaries, the regulator or even the employer is particularly interested  in direct investment. When I asked Aviva why the website they had put up for Tata staff, had not been advertised as part of the “Time to Choose” communication program, I was told that neither Tata or Aviva were wanting to promote what would have been seen to be a “non-advised solution”.

direct investment

The site the steelworkers didn’t see

How do we dis-intermediate and find our way back to our savings?

If my contention is correct , then I think it is time we started investing, not on the basis of abstract concepts such as “anticipated returns”, “attitude to risk” and “risk models” , but into things we understand.

2.  Trusted stewards

The direct ownership model – outlined above – represents  ideal engagement. But as mentioned immediately above, it is unlikely that most people will want to pay sufficient attention to their investments. For most of us, it is enough to know that we have stewards looking after our assets, ensuring we get value for money and that our assets are invested responsibly.

When acting responsibly, as happens in many occupational trusts, the trustees are known to members and respected as their representatives in everything from funding negotiations (even in DC) to the choices of investment managers and products.

Similarly, some IGCs have created forums for employers and employees and are liaising with their product provider (insurer of SIPP provider) on member’s behalf. IGCs and Trustees are our stewards and can – in time – become as trusted as DB trustees have been.

For stewards- whether IGCs or Trustees, to be trusted, they must be visible and they must engender trust through their actions. Sadly – too many of our stewards are not up to the mark, we need younger, more diverse and more enthusiastic stewards than we have today.

They need to be familiar with how member’s money is invested and act as our agents where we cannot act ourselves. This might include, for instance, exercising influence on managers in using voting rights and reporting on their activities through Chair Statements and IGC reports in a way that genuinely engages members in their pension funds.

Similarly, IGCs and Trustees should be the independent arbiters of the value for money that members are getting from the products they are offered by providers. Presenting the performance and costs of funds (for instance) in a meaningful way – allowing people to compare funds and platforms in a simple way, meets member needs. The DWP get this, their latest consultation on value for money specifically calls for value for money measures to be published online by occupational trustees. The FCA are expected to follow with instructions to IGCs.

In short, Trustees and IGCs could and should have a vital role in helping members to get to know their pension, but we are a very long way from this position at the moment.

The  culture that allows the positions on IGCs and Trustee boards to be dished out as sinecures, must cease and instead we need new blood.

3. Digital engagement

Much has been made of the power of a single platform run by the Government which allows people to see all their pensions in one place. Over 100,000 people are reported to have requested the DWP to offer such a “pension dashboard”.

There is clearly demand for such a service, though the DWP are understandably reticent about committing to it. I have written at length about the rights and wrongs of who provides the dashboard, but fundamentally we need at least one – and probably multiple dashboards.

The advent of “open banking” has exposed the lack of digital innovation in pensions. People expect to see not just what they’ve got , but what it’s worth and even whether it’s any good.

Technology now allows us to set up secure systems to scrape data from a variety of sources to provide real time information to people looking to know what their pensions pots are worth and what to do with them.

The development of means – not just to show their money – but to enable people to do things with their money, is not far away.

This is particularly the case with older people. We hear this week that 40% of the over 65s now shop on line (four times up on 5 years ago). It is surprising that there is no pension aisle in the moneysupermarket, no way to Go Compare pensions.

If pensions are to be accessible through dashboards, the comparison sites – including Comparethemarket, would be a good place to start.

Instead of excluding pensions from the digital revolution, the pension industry and Government should be working with the digital comparison sites to bring pensions to the people.


This long blog has explored the three best ways to get pensions to the mass of us who don’t do pensions. In truth, even if we got all three ideas working properly, there would still be a majority of us who would not pay attention to our pension.

We should not rely on “engagement” as a panacea to under-investment in our futures. The tough truth is that to have more in retirement, we need to save more, and the engine room for saving is the nudge mechanism we call auto-enrolment.

Like it or not, nudge works. The various “nudge” ideas being touted about – such as the “sidecar”, depend to work on people not being engaged, but saving on auto-pilot.

For most of us, “engagement” will happen when people have got sufficient savings to make them worth engaging with. We need to make it easier for people – when they want to engage – to engage- but we should not try to coerce people into engaging with pensions if they see no need. Such people need to be nudged to save – they can engage later!







Posted in auto-enrolment, pensions, WPC | Tagged , , , , , , , , | 7 Comments

Should we be empowering consumers or regulating providers?


Well we’re on to question three – all the proposed eight blogs  will be sent to WPC as our evidence – when I mean “our”- I mean mine – and the thoughts of anyone who cares to comment.

So here’s this morning’s exam question.

What is the relative importance of empowering consumers or regulating providers?

Quick Answer;   Chris Radford’s response to this question is always “we need better products”. I agree, products first – empowerment second – you cannot empower people to make good use of rubbish products.

The regulation of pension products for auto-enrolment by both FCA and tPR has so far been a success – they’ve kept a proper market going, driven away the crooks and it looks like we’re moving towards a future where we can draw our pensions collectively. More of the same please!

Empowerment hasn’t worked

If the 31 years since Pensions A day have taught us anything, it is that people do not want to be empowered to be pensions experts. More than 99% of people joining NEST – use the NEST default fund, most insurers now accept that no matter how much financial education they do in the workplace, 90% + of members will triple default (auto-enrol into standard contributions and funds. While marginal improvements can be made through workplace education programs, people tend to regress as soon as they change jobs.

Attitudes to defaulting have changed over the years. When defaults first arrived with stakeholder pensions, the herd mentality was decried by pensions experts who clearly felt we all could be our own CIO. Time and auto-enrolment have changed that. We now begrudgingly accept that it is better to be sub-optimally in – than empowered and out.

Which rather flies in the face of “pension freedoms”. Rousseau reminded us that though man is born free – everywhere he is in chains” and so it appears with people’s behaviours at retirement. Only 6% of us are seeking advice when we start thinking of crystallising our pensions and starting the “drawdown”.  Most of us (me included) are putting off the crystallisation event, knowing that it will trigger consequences about which we know little but care a lot.

We are frightened of the HMRC, of investment, of running out of money and we are frightened of the people who claim they can help us – the financial advisers.

Having rubbished the default means of spending our retirement savings – the annuity, we have found nothing to replace it. The consequence is that the amount of the collective DC savings pot being spent is tiny. The latest HMRC figures on drawdown suggest that we have financial constipation. The truth is that we are no more empowered to be our own actuaries than we were to be our own CIOs.

Regulating Providers

All efforts to empower the population have failed. We still have the same numbers engaging with their saving today as when i started out in 1984. We may have better tools to see our investments – but we have not become better at investing. We rely more than ever on defaults – the watchwords are “where do I sign”.

This suggests that our need for fiduciaries to manage our affairs – is stronger than ever. Whether we are talking about oversite and governance (IGCs and Trustees) or product design (insurers, asset managers and platform providers), it is the delivery of value for money within the product that is the critical success factor to the everyday saver.

So the Regulator must continue to regulate the sell-side and accept that the buy-side just “wants better product”.

By better product, I don’t mean “optimal product”, the quest for optimised solutions has been a millstone around the regulatory neck – and I particularly mean the FCA. Implied in the default solutions we use, is the assumption that what is on offer is the best option for most people, not for all people.

When we look at the default solutions that are emerging, we see that they are characterised by being low-cost rather than “low-risk”. The savings plans that we use for accumulating pensions use asset allocations that would be thrown out of court by the Pensions Regulator were they employed by Defined Benefit Schemes. The only person I know to have employed a 100% equity strategy to fund a pension deficit was Terry Smith (of Fundsmith). He did so with the backing of his personal savings which he put in hock to the Tullett Prebon scheme. That Terry’s bet paid off is to his great credit, Terry can rightly call himself his own CIO.

But it remains a fact that the DC accumulation strategies that we use for workplace pensions – adopt the same asset allocation as the maverick approach that Smith could only employ by providing private collateral. NEST has proved so far , that it is possible to replicate the diversified approach of growth strategies in DB plans , without breaking the bank on asset management fees. It seems to me that if the Pensions Regulator paid half as much attention to DC funding strategies as it did to DB funding strategies, we would have considerably better outcomes for DC savers. If we can combine the bravery and skill of Terry Smith with the prudence of those who run the PPF – we could have DC products that were fit for the 22nd century – when much of today’s saving will be spent!

If DC accumulation could be better regulated, the same could be said (cubed) for DC decumulation. The rather feeble recommendations of the FCA’s retirement outcomes review, focus on default investment pathways. It’s an idea that reminds me of sheep tracks off a mountain. They’re better than nothing but hardly the safest way down.

The concept of collective spending of a single pot – is at the heart of Collective Defined Contribution. To my mind, the pension industry’s refusal to grasp the opportunity to provide default decumulation through CDC schemes is extremely odd. But I sense that in their engagement with the needs of Britain’s postal workers, those civil servants in the DWP charged with writing the regulations for CDC to work, see beyond the job in hand – and to the bigger picture, the half a million of us who each year approach the point when we want to spend our pension savings,


The shift from DB to DC pension provision is only a part of the story, the introduction of 10m new savers through auto-enrolment completes it. We are now a society saving for the “nastiest hardest problem in finance” ( William Sharpe), more in hope than expectation.

The solution to the problems ahead do not lie with getting people more engaged but in getting people a product to engage with. Currently drawdown is not the mass-collective solution – it needs advice which isn’t there. We need better solutions – better products and providers who can deliver them. The Regulators are critical to the shaping of the pensions landscape.

While the 6% of the population who do engage are likely to carry a disproportionate amount of the nation’s wealth, the 94% of us who don’t (and don’t take advice) are the ones who need regulatory care. We will not be regulated into self-empowerment but we will sign-up for products that clearly do what we want them to.

WPC questions

Posted in pensions, WPC | Tagged , , , , , , | 2 Comments

Workplace pensions – value for money?

workplace pension 5


This is the second of eight blogs answering the questions set out in the Work and Pension Select’s inquiry into transparency in pensions. The idea is that this blog, together with comments from anyone who chooses, will go to Frank Field and his team.

Is the government doing enough to ensure that workplace pension savers get value for money?

In summary, my answer is “yes”, the Government is currently doing a good job.

The exam question is different than the title of the blog – purposefully. The responsibility for making workplace pensions work, is all of ours. We should not be relying on Government to kick our butts, we should adopt best practice as a matter of course.

So far, the opportunities to make money from workplace pensions have been few and far between. There were a few maverick master trusts set up as outright scams at the outset of auto-enrolment, those who scam for a living, take delight in exploring all avenues, but in practice, there has not been enough capital in workplace pensions to make them scam able. This will change over time and the precautions being put in place today by the DWP (enforced by TPR) mean that the days of the  “pop-up” master trusts are numbered.

The timeframes for workplace pensions are long, and rewards for providers are potentially immense. Look at the profitability timeline for NEST.

nest debt.png

source First Actuarial

What is interesting about this diagram is the speed at which the £1.2bn of projected debt decreases from 2028, by 2038 NEST is solvent and beyond that NEST is in profit. These figures are based on NEST’s own projections.

What can be said for NEST , can be said for any Master Trust that has the stomach to survive the turbulent waters of the next ten years.

The question for Government is not just how it ensures an efficient and stable market in 2018, but how it ensures that master trusts like NEST – deliver value for money, when they move into profit.

Value for money – for who?

Over the past few days , we have seen Fidelity launch zero cost funds in the USA. The concept is transferrable. If fund management can be “free”, why should a charge cap be set at 0.75% of the assets in the default fund?

The answer is of course because value must be shared, NEST is Government financed and effectively “from the people, for the people”, the tax-payer has subsidised NEST and the tax- payer should be rewarded by NEST, at least when NEST moves into profitability. I don’t see why the people deprived of services by the £1bn+ loan that NEST is drawing down, should not get value for the money the DWP has lent NEST. Post 2038, I hope that NEST will return money to the DWP so fund welfare to future generations.

As for not for profits, such as People’s Pension and Royal London , there is only one beneficiary of the wealth the master trust will bring – the people who have invested in it. I am convinced from what I have seen in Australia, that for the not-for-profit, trust based model is the best financial structure to take forward a vast project such as a workplace pension and I see no difficulties in this sector.

Where I see problems ahead – is with the “for profit” master trusts and group personal pensions run by insurers. Here there are fundamental conflicts between the interests of shareholders, management and beneficiaries that need tight Governmental supervision. The main players in this space are Aegon, Aviva, Royal London, Scottish Widows, Hargreaves Lansdown, Zurich and Smart Pensions. Ensuring that the competing claims for value for money from the various stakeholders involved, will be no easy task.

Add to these schemes , the numerous consultancy driven master trusts – operating on a vertically integrated basis, and you can see why the “for profit” sector is potentially, Government’s biggest challenge. As assets grow in size, the capacity for this part of the market to behave carnally grows.

IGCs and Trusts – are they fit for purpose?

The Government has chosen, rightly in my view, not to prescribe what workplace pensions should look like. This has happily led to a healthy market of workplace pension providers, many of which have already been mentioned. Of course there are many private occupational pensions which are being used for auto-enrolment pensions – most of which are sponsored by employers – way beyond the AE contribution minima.

It is tempting for Government to put its feet up and say “job done” simply because AE is compliant. It is particularly easy to say that to large single employer funded schemes where the contributions go beyond compliance. But that would be wrong.

We need all schemes to be measured for value for money – whether multi employer of single employer based on the efficiency measure of “value created per unit of money”.

That is why the Government are right to insist on value for money as a measure to be adopted by DC trust based schemes and contract based workplace pensions alike. A single measure of efficiency that rewards those who increase value and reduce member costs is the way for governance to go.

But the capacity of single employer trusts, master -trusts and contract based plans to measure and vigorously enforce value for money within the schemes and plans they oversee – is not yet proven. This blog looks at IGC reports when they are delivered each April and finds that many IGCs are failing in their key functions.

IGCs 2018 with TP16

Red – fail , orange – just getting by, green – ok

The situation is not static and there is not continuous improvement, some IGCs like Aviva and Royal London are getting better, some – like Legal and General, are getting worse.

The Government should be paying more attention to the IGC reports being produced, they are the shop windows for the IGCs, weak IGCs are likely to allow insurers to shift value for money away from policyholders and towards management and shareholders.

The same can be said for master trusts and single occupational pension schemes. I would like to say that trustees run these schemes for the benefit of members but I cannot. All too often I come across Chair of trustee reports that are bland boilerplates – merely ticking the boxes that allow the trustees (mostly paid) a cushy addition to portfolio careers. The standard of professional trusteeship within master trusts is variable and while there are centres of excellence there are plenty of examples of abject failure.

The net pay scandal is such an example

That trustees of occupational schemes can allow people auto-enrolled into their schemes, who pay no tax, to be denied the Government incentive available under relief at source (RAS) is a scandal. Either the scheme should change from net pay to RAS, or it should compensate the low paid from the sponsor’s pockets.

The Government could and should be prioritising this issue , HMRC seem totally disinterested.

That trustees, the DWP and tPR, HMRC, PLSA, PMI and even the FCA (who oversee some of the insured master trusts operating under net pay), can allow the net-pay scandal to continue , shows me that many still think workplace pensions are for the rich and the state pension is for the poor. So long as this thinking persists, the almost criminal denial of incentives to those who save and get no incentive for doing so, is an indictment of governance failures among trust-based plans.

In my opinion, the risk of  failure within trust based plans , is around lack of professionalism , of care and of effort. This is quite the opposite from the risk of failure among the insurers and SIPP providers whose risk arises from conflicts between various stakeholders.


In general I am impressed by the value for money emerging from workplace pensions and I like the way most are governed.

I see problems down the line arising from the potential profitability of these schemes. My concern for the “for profit” sector, is that they cash-cow workplace pensions and make them a nice little earner for shareholders – not investing for members or passing on savings in lower fees.  My concern for the not for profit sector- is the ineptitude and laziness of many trustees who see their roles as sinecures.

There are many things that master trusts and the remaining own- occupational DC schemes can and should be looking at. These include sorting out default investment pathways for those retiring and looking at collective options – arising from the work being done on CDC. I hope that we will hear more from big schemes like NEST and Peoples on their “decumulation strategies” (eg – how we spend our money).

The work done recently by DWP (being enforced by tPR) is good, it will make master trusts fit for the future and see those that aren’t – find suitable partners to take them over.

By adopting consistent value for money measurement, and through the publication of league tables showing who is succeeding and who lagging, I believe we can show members of workplace pensions a way to choose who looks after their money over time.

My conclusion is therefore that “yes, the Government is doing enough to ensure that workplace pension savers get value for money” but they could do more!

Pension playpen logo

Posted in advice gap, pensions | Tagged , , , , , , , | 6 Comments

Opacity pays! Shock revelation from Pension PlayPen lunch

pigs trough

Anonymity maintained

In a top-secret pension playpen lunch – details of which have been leaked to the Pension Plowman –  key industry figures agreed that opacity pays!

Despite the WPC call for responses to its transparency paper, the secretive group are understood to have discussed a counter-strategy.

“We’re thinking of starting a campaign likening transparency to the loch Ness monster”, said one diner.

“Drown them in their own data!” – said another

“Selective data release – with managed transparency ” muttered one consultant.

The meeting broke up in discord when the bill revealed the need for a collective defined contribution. Several diners are reported to have created an intercoursal transfer by snaffling two of Mrs Miggins’ pies (and sauce).

Mrs miggins






Posted in pensions | Tagged , , , | Leave a comment

Lunch at the Counting House today.


I’m excited that the Work and Pensions Select Committee are exploring transparency in pensions.

But is anybody else?

Paul Lewis could be bothered to tweet his submission – which I thought pretty cool!


So what about you?

Do you want to join me to discuss whether this matters and what you can do to make your feelings heard?

If you do, come to the Counting House at 12pm for 12.30 today (Monday). Lunch shouldn’t cost more than £15 and you can participate without eating or drinking.

The Counting House is in the City of London, right by the BANK!

I hope to see you there!

Posted in pensions | Leave a comment