David Brooks
If you missed David Brooks’ excellent presentation to the Pension PlayPen yesterday – or if you simply want to download his slides – here’s the link to the slides and here’s a recording of the event.
Next week – Tom McPhail will be putting pensions to rights!
The enabling legislation is now in place for the 2017 auto-enrolment reforms to be put in place. We have a small number of dedicated politicians to thank for this, including Ros Altmann.
It was an honour to steer the Extension of Auto-enrolment Bill into law yesterday and this will help more people build better pensions, especially the young and lower paid. Read my blog. https://t.co/v9koJdYBil
— Ros Altmann (@rosaltmann) September 19, 2023
That the majority of people need to save harder for longer to meet their retirement expectations is beyond doubt. The AE reforms mean that more of us will be auto-enrolled and that we will generally pay more by way of contributions , because our pensionable earnings will increase. That is not the same as saying that contribution rates will increase, it just redefines the band of earnings we contribute against.
“Enabling” is not the same as “enacting”. For the extension of auto-enrolment to become real to people , payroll and employers then we need the Treasury and DWP to agree the timing for the 2017 proposals to come into force.
There is never a “good time” to increase what is effectively a voluntary tax- increase. However, as mortgage rates continue at relatively high levels as rents, especially in London, soar and as the cost of paying everyday bills continues to outstrip many people’s incomes, now would be a brave time to increase overall saving.
Nest Insight published the results of various savings trials that have been ongoing for some years now. I will pick out what appears to me the most relevant, the introduction by waste disposers SUEZ of an auto-enrolment savings scheme through payroll.
To put things in context, Nest’s initial sidecar savings trial had ended in good intentions but little action. Clearly having to elect to be a saver, wasn’t working.
“Opt out savings” was what SUEZ boldly implemented and the result are startling
By moving from opt-in to opt-out , SUEZ upped take up 47 times and that led to six times higher balances per saver. Multiply the two together and you get nearly 300 times much saving going on.
Of course some of this excess savings might have gone on anywhere – in people’s bank accounts, but SUEZ own research that most of the savings came about where previously no saving happened.
Nest Insight’s timing in releasing this data on the very day the “extension of auto-enrolment act” became law, is immaculate. Well done Nest Insight and well done SUEZ.
Many people I know, consider auto-enrolment a payroll tax on those too vulnerable to opt-out. I can see their point. Recent studies suggest that nearly 1/3 of those enrolled into pensions have considered opting-out but those actually opting out is still less than 10% of the eligible population of pension savers.
This is close to endorsing what SUEZ found, that more people who are opted-in stay in and less people opt-out than say they’re going to . Call this inertia if you like, but in the end, we are reminded of Mr Micawber.
Those who believe that financial resilience and mental well-being, included Charles Dickens. But we must remember that there are many for whom auto-enrolment , even with the easy access that SUEZ’ saving plan – gives, can still lead some to swap savings for debt. Debt at the bottom of the financial hierarchy is hideously expensive.
My view is that financial resilience through the encouraged savings plan pioneered by SUEZ is the way to go. I do not consider it excessive intervention – more importantly, neither does SUEZ or its staff.
The changes to auto-enrolment enabled by this private member’s act were supported by Government – that’s why they happened. But to be realised they need the Treasury to sanction the cost to the exchequer of extra tax-relief and the impact to people’s pockets of what many will call another savings tax.
Fiscally and politically there is never a good moment, but we should remember that auto-enrolment was introduced at a time of austerity and worked. Arguably – as we tighten our belts, we may welcome enforced prudence through an increase in our saving.
So I hope that the Government will be bold and press ahead. It could announce the changes as early as the Autumn statement in a few weeks time. Those changes could become law as soon as April 2024 and Britain’s savers could be seeing increased balances by this time next year.
But there are a lot of “ifs” and “buts” to be decided between now and the time the Government pushes the button and what is done cannot be easily undone.
More realistically, we could be in for another round of dreary consultations.
It would be impressive for a Chancellor to decrease take-home prior to a General Election but not unprecedented. We should remember that from 2024 well over a million low earners will finally get a rebate of contributions paid to them (if they save as non-taxpayers in net pay schemes). The cashflows from those rebates will be hitting low-earner bank accounts in 2025.
Maybe the introduction of net pay contribution relief could be introduced as a counter to the loss of take-home. Maybe the Government’s promise to implement the 2017 AE reforms by the middle of this decade, is not as fanciful as many supposed.
The FT sees a backlash from business as Pension Protection Fund’s reserves swell to more than £12bn.
The PPF is consulting on halving its levy from £200m to £100m pa, but many are saying this is too little and that the plan to keep the levy at £100m is unnecessary. Employers point to the PPFs £12bn surplus as “prudence” enough.
The FR attributes the £12bn surplus to fewer than anticipated claims and good investment returns. But the underlying cause is a failure of nerve within the pension system.
The PPF is infact a victim of the excess tenderness shown to it by the Pensions Regulator and a more general malaise that has required employers to fund DB pensions as if every day were their last.
The admirable management of the PPF has led to it becoming independent of fund managers, advisers and external administration, improving performance net of fees and creating a highly efficient machine that converts assets into pensions with a minimum of fuss. It has proved itself more than capable of looking after itself,
My view is that we still treat the PPF as a fledgeling, but it is flying like an eagle. But it does not see itself that way.
The question for the PPF is how to reduce its dependency on levies without severing a lifeline to ongoing revenues. It argues that if they fall below the proposed £100m next year, the umbilical will be damaged beyond useful repair.
The PPF “is limited by law from increasing the levy by a maximum of 25 per cent year-on-year. This potentially exposes it to risks in bad years if it cut the levy too far”
A #pensions law of unintended consequences. https://t.co/RTg5Q4xhWc
— Mike Harrison (@HigherEdActuary) September 20, 2023
Nature would argue that umbilicals outlive their purpose quite early in the lifecycle!
Employers rightly begrudge having to pay any risk premium to an organisation with such a supposed surplus and argue that they have to take risks in running their business while funding the PPF to ridiculous levels of prudence.
You can see their point.
The Pension Regulator famously has as one of its key objectives “to protect the PPF”. It sees its business as to bully employers into funding deficit contributions, trustees to adopt low-risk investment strategies and it has gone to extreme lengths to keep schemes out of the PPF. Examples include the regulatory apportionment agreements for BHS and BSPS, which have worked in allowing the schemes to swerve the PPF but at huge cost to third parties.
The Pension Regulator’s fervent pursuit of this objective has led to contagion among trustees and their advisers. The chief victims of schemes going into the PPF are of course those with the largest deferred benefits, these are often the senior management of employers who are perversely incentivised to go along with “avoid the PPF at all costs” strategies.
The result is that the PPF is doing its job, but taking less risk than it ought. It is a victim of an excess of tenderness. It is a half full hospital ward.
The PPF is now being called upon to take more risk on all sides, Former pension minister
Steve Webb, agrees reform is needed telling the FT.
“The government should simply change the rules which would free up the PPF to make further cuts in its levy”.
But the rules governing the levy are there to provide a degree of certainty not just to the PPF but to employers and the Government has a lot more pension issues on its agenda than to tend to the funding of its lifeboat.
Webb’s firm are at the same time calling for the PPF to introduce a super levy, which the PPF has proposed would be set at 0.6% of liabilities, to provide schemes with the capacity to do what they like with their investments in return for a promise that if things go wrong, the PPF will pick up the entirety of the member’s benefit promise.
The PPF is also looking for more risk to be taken, but this is in another direction. It wants to become a consolidator of last resort for schemes that can neither sell their assets to an insurer and wash their hands of liabilities, or soldier on under their own steam (with the backing of a sponsor).
The problem with becoming a consolidator is that this too would require Government to rewrite its rules. At present, if the risks within the PPF overwhelm it, it has recourse to reducing the benefits payable to all members. I have described this unlikely option as making it operate as a CDC scheme.
To find an insurer of last resort , the PPF would need a Government backstop. That would require legislation and it’s precisely that legislation that the Pensions Regulator set out to avoid with its “excess of tenderness” approach.
In a well-timed article in FT Alphaville, Toby Nangle asks
and comes to the conclusion that there is no other way for the PPF to take on a proactive role as a consolidator than to seek a tax-payer guarantee. The tax-payer does issue such guarantees
British Coal’s pension scheme is nationalised as are large parts of the Royal Mail’s pension.
The Government bailed out the British banking system by taking on large parts of it in 2008.
And of course the Government has undertaken to pay defined benefit pension to millions who have or still work in the public sector.
While it is politically hard to see a Conservative chancellor lending our balance sheet to the PPF, it is not beyond a Labour administration.
But as Nagle points out, any consolidator is a bad consolidator for the powerful insurance lobby
From commercial insurers’ perspective, a public superfund with a government guarantee could be a formidable competitor to their bulk-annuity business.
Indeed – any kind of intervention runs the risk of driving a coach and horses through the Mansion House reforms.
If .. the cost of a government guarantee are too low it’s hard to see why schemes would ever choose buyout over public superfund; if they’re too high it’s hard to see why they’d ever veer away from buyout. The middle-ground looks vanishingly small.
To my mind, the problem with the PPF is not with its management (which is good) , nor with the levy (which is excessive but not damagingly so). The problem is that the PPF has not been allowed to do its job and provide a lifeboat to schemes that lose their sponsor.
There are plenty of entrepreneurs waiting in the wings to take on pension risk, without the overly engineered RAAs favored by TPR in the past. Where superfunds and capital backed journeys will not tread, the PPF picks up the pieces.
There will come a time when the PPF wants to sever its umbilical cord and abandon protecting its levy but that time does not appear to have arrived. To abandon its levy, the PPF would have to come clean on the answer to Toby’s question and agree that the protector can protect itself.
But that will mean coming clean about a risk that the PPF is currently running, that it has nothing behind it but its own best endeavours.
As this blog has said many times, we are all dependent on our best endeavours to some degree and a more open conversation about risk-sharing is to be welcomed.
“Pension scams ruin lives and inflict immense financial and mental trauma on victims. It is great that we are seeing substantial progress against fraudsters with the proportion of adults receiving unsolicited approaches regarding their pension falling rapidly. Action from the Regulator and the Government appears to be making a really positive impact.” – Simon Kew
Coffee Morning – Update on Pension Scamming from Broadstone CPD included
When – Tuesday September 19th, 2023 at 10:30 am
At our next event Broadstone’s David Brooks will be giving us an update on Pension Scamming.
Dave will give us an overview of where we are on pension scams. A brief history of scams together with some stats and a jog through the legislative and regulatory steps to battle them, on to what administrators and trustees can do to help members and maybe even some reasons to be optimistic for the future.
No doubt there will also be an update on the Pension Regulator’s role and their recent initiatives which may not have been well received from some parties.
Dave Brooks is Head of Policy at Broadstone and has a 20+ year career in pensions beginning in administration and moving into technical and consulting around 2006. Dave is a regular commentator on pensions issue to trade & national press and radio.
We hope you can join us.
Platform
MicrosoftTeams
You can join directly using this link (copied below)
A group of large pension schemes are launching what they claim to be a free service communicating changes to Guaranteed Minimum Pensions. I’m about to find out more.
There are many exciting things happening in pensions but changes to Guaranteed Minimum Pensions are not among them.
So I will be trotting down to Brightwell’s offices in America Square this lunchtime to see why people have been confused since 1990 and whether the claims of gmpeasy that they are capable of curing my GMPe queasiness, have any validity.
My old employers – First Actuarial – have always been on top of the GMP game. They have produced an excellent primer which I have re-read in advance of the meeting, so I don’t sound a GMP thicko. You can read it here.
My heart rate drops when I read this document, it should be prescribed on the NHS.
Pension people divide between those who don’t understand GMP equalisation (99%) and those that do (1%). You can tell the 1% that do – they turn up to conferences on GMP equalisation with smug smiles on their faces.
The rest of us are confused.
Google GMP and you’ll find it stands for “Good Management Practice” or is a brand of alloy wheels. So communicating GMP to a querulous pension public is a task and a half. But it’s clearly a task that occupational schemes (in conjunction with Quietroom) think worth taking on.
First Actuarial numbers suggest that GMP equalisation is likely to make rather a small difference to our pensions and won’t impact much on scheme liabilities
But in pension valuations, every basis point counts and having lived through the Lloyds GMP equalisation case, I am well aware of how much legal time has been devoted to these tiny fractions.
From a member’s point of view, GMP equalisation seems all good news
In equalising GMPs, members with GMPs built up between 17 May 1990 and 5 April 1997 may receive a small top up to their benefits. Those members receiving a pension
may also receive a back payment to compensate for past inequalities. As a result, all schemes with GMPs will see an increase in the value of their scheme liabilities.
But to get to a determination of what that top-up will be, many times the value of the top-up will have been spent in actuarial and administrative time. Believe you me, it would have been better had the GMP never been invented – let alone equalised.
Today’s event will be launching a new, free to use, GMPe communications toolkit. This has been developed and funded by a collaboration of defined benefit schemes, working with Quietroom and Shula PR and Policy.
At the launch they’ll be talking through how they developed their communications and showcasing a new animated explainer that schemes can use to help explain what’s happening to members.
They’ll be sharing the content and collateral which has been kept under wraps till lunchtime today.
So by the end of today, expect to see this blog shimmering with GMP animation and me with the smug face worn by the GMP cognoscenti
Lady Lucy motored up through Hambledon Lock on Sunday morning, its crew noting that Russell Brand’s thatched cottage had its doors open and lights on.
We came back in the afternoon, clearly the family was at home. It was raining hard by then
Since this picture was taken Brand has had a climbing frame assembled in the garden and a barge is on the river mooring. The Mirror reports a swimming pool’s been put in at the back (most people use the one at the front).
But to my guests it was just that pretty thatched house,we hadn’t worked out what must have been going on inside.
It was a quiet Sunday morning with the weather breaking after lunch. Everything was as normal as Breughel’s masterpiece of Icarus falling to earth
Just a mile downstream from Brand’s Medmenham cottage is the site of the former Hellfire Club, it too has a children’s playground on its riverside lawn. Times have changed,
20 more miles down river, Windsor’s Theatre Royal had been readying itself for the sold out performance Brand was due to be given tomorrow. Like the rest of his September shows, this has been postponed. Icarus has fallen.
Brand is our 21st Century Lord Byron. In terms of conduct – that is not meant as a compliment.
Like Byron, he is good with words, he has charisma and he is a sexual being. Unlike Byron, he is not a poet- he doesn’t write for posterity. But he is a very good manipulator of digital media and he enchants his public with his self-confidence. We will forget Brand before Byron but right now he fits the bill. .
When it comes to bills, the Windsor theatre did not have to advertise the show. It sold out in a space more used to Ken Dodd and Penelope Keith.
Byron would have understood, there is a prurient fascination for depravity that both he and Brand tap into. Brand has caught the Zeitgeist, he plays to popular conspiracy theory and then some. He is the alternative voice for every would be romantic visionary, the bard of discontent.
So he is an unlikely pin-up for blue rinse Berkshire. To get to Windsor he will pass through Theresa May’s constituency of Maidenhead. The incongruity of his riverside home set in rural Buckinghamshire and his firebrand videos seems deliberate
He is a throw-back to a different past, a past we have happily escaped from, it’s the past of fast living and beggar the consequence. It is our disgraceful past.
Byron died at 36 in 1824 but did not get a plaque in poet’s corner for 150 years. Byron was and still is a disgraced character in our poetic culture- a rogue genius who was the envy of those who didn’t know him and the ruin of women who did.
But the homelife of a celebrity is never as glamorous as their descent. Breughel’s Icarus falls into the sea without disturbing the plowman or the shepherd. Auden picked up on it.
In Brueghel’s Icarus, for instance: how everything turns awayQuite leisurely from the disaster; the ploughman mayHave heard the splash, the forsaken cry,But for him it was not an important failure; the sun shoneAs it had to on the white legs disappearing into the greenWater; and the expensive delicate ship that must have seenSomething amazing, a boy falling out of the sky,Had somewhere to get to and sailed calmly on.
Up river from Medmenham is Fawley Bottom (“Fawley’s Bum”to John Betjeman) . There the poet, painter and ceramicist , John Piper lived and worked. You can see an excellent exhibition of his work in the Henley Rowing Museum ( I went lastt Sunday). This is the cultural inheritance of Berkshire .
The Henley Rowing Museum is silent on Russell Brand and makes no mention of the Hellfire Club . They don’t comment on Stanley Spencer down at Cookham either – a little mad for little England.
This is the bizarre paradox of Brand’s kind of fame. He is famous for the image that he now has to disown or – like celebrities from Tate to Trump – embrace.
This vilain who got the BBC to ferry his 16 year old mistress from school to his chamber. The vile casanova who forced himself unprotected on unconsenting damsels. This hedonist, a stranger to the razor, this rake, this Burns-like impregnator. This jack in the box of unspeakable acts brazen in his announcement of his promiscuity. This person who attracts our time and repels our consciences. He is the king of the conspiracy theory, the president of bullshit.
For all this he has his 9m youtube followers. Brand can make or break politicians. in 2015 he was courted by the Millibands and he delivered powerfully for the Labour party.
But maybe he drove as many of his Maidenhead neighbours out to vote the other way
That’s bipolarisation for you.
Liz Truss tells LBC’s @HenryRiley1 that the retirement age needs to be raised and the sustainability of the triple lock is a ‘huge problem’.
She also confirms that she will attend the Conservative conference next month and ‘will be saying more’. pic.twitter.com/3GbQz3ifGV
— LBC (@LBC) September 18, 2023
Liz Truss knows a bit about pensions , that’s for sure and her attitude towards the triple lock will bring comfort to those of us, who would like it to continue.
They will also be pleased to know that her version of fantasy pensions has the state pension age vanishing over the boomer’s horizon.
We may not need pensions if Liz gets her way, she has a vision for Britain which Mark Carney has characterised as “Argentina by the Channel”.
This could result in a bit of reverse immigration (emigration?) as impoverished Brits flee to France on paddleboards, hoping to escape the ravages of a country unable to pay its bills.
Pensioners could become a breed of the past as those over 80 fall like flies as they queue for food banks and those under 80 work in geriatric gulags boosting Britain’s ailing productivity.
Growth is not a dirty word. For Britain to pay its state and public pensions as we expect to, we need growth in our gross domestic product (it’s what the Scape rate is based on). Without growth, employers, public sector workers have to pay more for public sector pensions. It’s to compensate for lower than expected tax revenues from lower than expected productivity.
Private sector pensions also rely on a strong economy, they are broadly backed by Government debt (gilts) which needs to be serviced and repaid if our DB schemes are to remain solvent. There is a symbiotic relationship between pensions and our national economy, both need to prosper. Pensions mustn’t be seen as part of the problem but as part of the solution.
The Mansion House reforms aren’t a ruse to get the City’s hands on our pension, they are about reconnecting our pension funds with what drives that growth – capital for investment.
Truss now sees pensions as unaffordable and that’s ironic because half a trillion pounds of our national wealth has gone to pay off banks for the money pension funds borrowed. Truss’ argument that pensions aren’t affordable is down to her actions. Truss is talking down pensions and that’s no joke.
Pensions become affordable when we have growth but that growth has yet to happen. Growth happens with capital, our capital. We haven’t seen pensions contributing much to the UK’s economic growth recently; but given a fair wind and a change of mindset within the pension industry, we might avoid Britain becoming Argentina on the channel. We might have a decent society that pays its pensioners a proper wage in retirement.
Truss – never again
Are you interested in why employers end up with the workplace pension into which they pay their and their staff’s money?
Do you want to know more about how they value that pension and why they consider switching pensions?
Then you should read chapter 7 of the DWP employer survey 2022 (updated Sept 2023)
The Department for Work and Pensions (DWP) commissioned IFF Research to
conduct the 2022 Employer Survey. This report presents findings from the survey,
conducted with 8,002 employers in Great Britain.
The aim of the survey was to understand employer attitudes and behaviour in relation to a range of topics of interest to DWP, including recruitment, retention, progression, pensions, specific groups who may be disadvantaged in the labour market, health and disability at work, and employer engagement with DWP.
Fieldwork was carried out between 8 February and 6 April 2022.
Here are the real answers to proper questions!
Under the Pensions Act 2008 every employer in the UK must put certain staff into a
workplace pension scheme and contribute toward it. This is called automatic
enrolment. The survey asked employers whether, in the last year, they had
automatically enrolled employees who fall outside of the automatic enrolment
legislation criteria. These employees are those aged 18-21 years, earning less than
£10,000 a year, and aged above State Pension Age.
Most employers had not automatically enrolled workers in these groups: 15 per cent
of employers had automatically enrolled staff aged 18-21, 13 per cent of employers
had automatically enrolled staff earning less than £10,000 a year, and 7 per cent of
employers had automatically enrolled workers aged above State Pension Age.
Employers were asked what information or guidance they provide for their employees
on State Pension entitlement, workplace pensions / Automatic-Enrolment, and
retirement income planning. A majority (68%) of employers said they provide their
employees with information or guidance on workplace pensions / Automatic Enrolment. Around a third (35%) of employers said they provide information and
guidance on State Pension entitlement, while fewer (15%) said they provide
information or guidance on retirement income planning for their staff.
Employers who said they do provide information or guidance for their employees
were then asked in what ways they have offered this advice to their staff. The most
common was by email (40%), followed by referrals to external organisations (28%),
and courses or workshops (17%). Just over a quarter (27%) of employers didn’t know
how this information is provided to their employees.
We saw the LDI crisis coming – we called it. Lis Truss had not been warned because none of her people were listening.
If regulators had seen the Sep22 pensions crisis coming – and Truss had been warned – she would have cancelled the mini-Budget.
But no one did see it coming, so it suited a great many people to blame Truss for the whole debacle.https://t.co/qtyzzVP9aZ
— Fraser Nelson (@FraserNelson) September 16, 2023
The pension big-wigs are quite happy for Fraser’s assessment to become the received wisdom. I’m not and nor are those who did see the LDI crisis coming
Key in LDI to the search engine on this blog for the many excellent articles throughout 2021 and 2022 warning of the risks of over-concentrating pension strategies on gilts and borrowing to do so using Repos and Derivatives.
Click the links at the bottom of this blog and you will see my first broadside was in 2012, this blog also contains an excellent comment from Robin Rowles
For the next ten years, the blog has continued to argue that LDI is based on the wrong assumptions. It has gathered many followers in that time including some concerned consultants.
In June 2021 by blog featured Raj Mody of PWC who told us
“Pension schemes have been “shoehorned” into valuing liabilities against gilts, creating a “herd mentality” that does not reflect scheme funding accurately”, said PwC on a blog which also contained a stern warning from Con Keating on the impact of regulation on the operation of pension schemes.
In March of 2022, Con Keating and Iain Clacher posted an article debunking LDI
It is often claimed that these leveraged LDI strategies reduce the risk of the scheme. This runs counter to elementary financial theory where leverage increases, and in some instances is purposefully used to increase, risk and return.
It concluded with a broadside at the Regulator’s failings to properly understand the risks pension schemes were taking
“The mood music was emphatically always to hedge and to fund more and more. The tone of their engagement teams was not the avuncular Dixon of Dock Green, rather more Commander Kenneth Drury’s: “Pay up or we’ll fit you up.” TPR would, of course, deny it if challenged.”
On Tuesday 21st June, Pension PlayPen ran an LDI special asking “what can possibly go wrong – sadly we only got 100 people on the call and neither Liz or Kwasi attended
It wasn’t just this blog, it was – much more influentially – the FT
Hi Fraser – I wrote a piece called “The big collateral call facing UK pension funds” in the @FT 2mths prior to the miniBudget. Here’s the link. https://t.co/Npi15W4rnG
— Toby Nangle (@toby_n) September 17, 2023
Toby’s article , dated July 2022, was close to the edge of the precipice
Three weeks earlier, Chris Flood had posted a warning from consultants Mercer headline
Those , honest enough to accept they missed the warnings, included the PPF which admitted it could and should have lowered its exposure to LDI prior to the events of last September.
This blog continues to chronicle the changing narrative of the pensions industry to explain why they didn’t see this coming.
As early as mid October 2022, Keating and Clacher were commenting on the “reframing of the LDI narrative to suit those potentially exposed”
Con Keating and Iain Clacher now estimate that Corporate DB pension plans lost over half a trillion pounds from their asset base in 2022, most of it as a result of the sell-down of assets to meet the collateral calls needed to keep LDI hedges in place
Saying so hasn’t done them much good, nor me. Raj Mody and PWC, Toby Nangle, Chris Flood and Chris Giles had all been sending out warnings but no-one got any thanks for doing so, they deserve recognition that they put their reputations on the line and had them tarnished – despite being right
The public face of the pensions industry is the sunny face of schemes that have found themselves with healthy surpluses despite the losses.
What is not being said is that those surpluses could have been many hundreds of billions pound bigger if the hedges had been lifted at the end of 2021.
It did not take a crystal ball to work out that inflation was on its way. The energy crisis, food inflation and the pressure on the central banks to start unwinding quantitative easing meant that predicting interest rate rises in 2022 was an easy game. Smart money fixed mortgages and pre-purchased commodities at 2021 prices. Smart money did not take hedges off LDI.
There was a very strong coercive pressure on trustees from Regulators and from LDI providers to do nothing. The feeling was that to call the Emperor’s new clothes was to risk a run on liquidity which could cause a systemic risk.
So everyone remained seated and hoped that the storm would blow over. Stress tests had been down and they told pension scheme trustees, providers and regulators that even if the big bad wolf huffed and puffed, he couldn’t blow the house down. Unfortunately they underestimated the big-bad-wolf’s lung capacity.
We are at now at state 2 of the denial of the LDI catastrophy. Stage 1 was what we saw at the PLSA annual conference last year where everyone pretended that nothing was going on.
Stage 2 is to say that no one could have seen Liz Truss coming. It is true that the Kwasi mini-budget wasn’t anticipated and probably couldn’t have been. It was monumental foolishness, but you can’t rule out monumental foolishness from a Government that gave us Boris Johnson. We voted in monumental foolishness.
We now move beyond blaming Liz Truss and do as Fraser Nelson does, see the blame passing to regulators and by extension pension advisers. Except that this argument doesn’t work unless there is a body of opinion warning regulators, advisers and trustees of what was to come (and for their influence to have permeated Downing Street).
Fraser Nelson ends his article with a postscript.
I say that “no one saw it coming” but is a big generalisation. If anyone was pointing to the size of the LDI bomb at the time, please let me know in comments and I’ll update this blog.
The final stage of the narrative will be to accept that Nelson Fraser is substantively right. We just need to change “no one saw LDI coming” to, “no one wanted to listen“. We need a change of mindset – as the new CEO at TPR is calling for.
Pension Awareness Week has been and gone. I cannot say I contributed much to its delivery – though this blog and Pension PlayPen did their best to promote awareness of it as a thing.
All week I saw posts which began “as it’s pension awareness week” and continued with an advertisement for an aspect of private pensions.
For instance, I clicked on this picture below to find myself reading an advert to consolidate my pension pots to a personal pension called Moneybox. Moneybox also present a video on the site telling you how to find lost pensions (and consolidate to moneybox)
If you press the URL you find that “5 reasons not to miss pensions awareness day” has morphed into “5 reasons to consolidate your pensions”.
This is confusing to people who come on the site, not least because Pension Awareness Week is brought to you by the DWP and MaPS (Trading as Money Helper). Pension Attention is a broader marketing campaign established by PLSA/ABI (see below) and Pension Geeks founded PAD and has delivered for 10 years.
While #PAD23 looks a public service, it is definitely a public/private partnership. Click on “our partners” and you get a different picture. “Our partners” seems to be a euphemism for “our sponsors.
Last year, Pension Awareness Week had Big Zuu, who gave the week some focus and some national publicity
Big Zuu was out of this year’s picture, this promotion(from last year’s Daily Mail) is preserved on my blog.
Big Zuu came to us via Pension Attention, a joint enterprise between PLSA and ABI of which Pension Awareness Week is a part.
Big Zuu was supposed to be handing the megaphone on
There’s not long to go until we find out who @ItsBigZuu will be handing the pensions megaphone over to. All will be revealed on Wednesday… but in the meantime, follow us on Instagram so you don’t miss any of the #PensionAttention action!https://t.co/hmETvJeWTK pic.twitter.com/S0jwyqWgHe
— Pay Your Pension Some Attention! (@PensionAttn) September 15, 2023
September 15th has been and gone and all we’ve heard from Big Zuu in 2023 is that he’s a “Spendaver”.
Spendaver (noun) – a person who spends money but definitely cares about saving it. Example: @ItsBigZuu!
Are you a saver, a spender or, like @Itsbigzuu, a spendaver?! We ask Big Zuu the Big Questions. https://t.co/EXlHd1pLFJ #PensionAttention #PAD23 pic.twitter.com/9BRRdiOhfY
— Pay Your Pension Some Attention! (@PensionAttn) September 12, 2023
This news doesn’t seem to have got much attention.
We learn more from Standard Life’s website.
We are now in “pension engagement season”
This is a new season that lasts from 11th September to 29th October and is otherwise known as Pension Attention 2023. Standard Life explain.
Pension Attention 2023 is the second year of this campaign, created by the ABI and PLSA, in conjunction with the DWP and 13 industry partners to raise awareness and boost engagement. It launched with Pension Awareness Week (11-15 September) and includes National Pension Tracing Day (29 October).
With joint industry support, it’ll mean there’s a lot of discussion and visibility of pensions from September to November, so lots for your members to get involved in.
Post Pension Awareness Week, we’ve now updated this page and our ready-to-go materials to help you continue to support your members through this campaign.
The “ready to go materials”, are-unsurprisingly a library of marketing collateral designed for Standard Life employers make better use of Standard Life Workplace Pensions.
Big Zuu is not making a reappearance – I suspect the marketing budget has expired for his heavyweight services.
If Pension Attention was bringing us Pension Awareness week, I missed it! It too has its “partners” who look remarkably like the partners for Pension Awareness Day
Pension Attention’s website tells us that we can expect another slug of marketing material on September 20th. Let’s hope that it gets the £10m campaign past its 482 followers on social media.
Apart from the numerous ads to book a session with MoneyHelper and a solitary teach-in session on the State Pension , pension awareness day/week was almost entirely focussed on “live shows” personal finances, mortgages, workplace pensions , SIPPs and annuities. Why mortgages got a slot and DB pensions got nothing, seems down to the partnership/sponsorship deals.
The “live shows” don’t seem to have been curated. Let’s hope they’ve been recorded and are distributed, though I suspect that several of them will be considered “financial promotions” so fall under FCA rules (which Pension Awareness Day is not subject to).
I appreciate that Pension Awareness Week has to be paid for and that the much trumpeted sponsorship of the Pension Attention campaign is only one of the sponsors, but we do seem to be treading a fine line between education and advertising.
What appears to be a national campaign sponsored by the Government turns out to be a series of local campaigns paid for by providers. There is very little on the site for those who are in receipt of a pension, very little about turning pots to pensions and virtually nothing for the millions of us who accrue defined benefits through public sector pensions and the remaining corporate DB plans.
The dilution of state involvement in this year’s campaign and the increase in overt advertisements from providers suggests that “measures for success” are changing. The overall organisers of Pension Awareness Week/Day, the Pension Geeks are now owned by Aegon who are not listed as one of the sponsors or Partners.
Pension Awareness Day is billed as an industry initiative to spread awareness about pensions but the amount that is actually about pensions (rather than saving for retirement – or mortgages) is minimal.
So let’s hope that as well as the curated videos of the “live shows”, we get some feedback on who viewed what and in what quantities.
If there is no bus and no public meetings, the digital footprint of Pension Awareness Week becomes the public’s only measure of success.
