Hey teachers, leave the kids to learn

kings cambridge

I’m not writing as a pensions expert or actuary (I’m neither). I’m writing as a parent of a 22 year old completing the Cambridge Geography Tripos. He , and his contemporaries are facing considerable disruption to the teaching they’ve paid for.

I don”t know any students who aren’t supporting their teacher’s right to a decent pension at a fair price and I don’t see bleating about VFM for the student loan they are extending. Students have been tolerant of the poor deal they have got and I’m proud of my son for his tolerance.

But there comes a time when someone has to stand up and say enough is enough and that should not be the students but people like me – so here goes.

The hard line of the UCU’s Left is now the dominant force of the University College Union’s policy making. This doesn’t give moderates much room for manoeuvre. UCU left’s positions appear to include demanding the USS executive resigns or is sacked. This is not how to resolve  the dispute. Nor is its vilification of the JEP for not demanding Bill Galvin’s head upon a platter. I am far from happy about the influence of militant left-wingers on the UCU

But the JEP, ably led by Joanne Segars, has produced a strongly worded report that should be giving the UCU confidence. The UCU has in Jo O’Grady a powerful leader. The cards are stacking up in their favour, why risk further unnecessary action by adopting such a confrontational approach. The answer appears to be a return to 1967.

And time is the UCU’s friend,  USS are still suffeciently invested in real assets for it to have benefited from the recent market upswing. Future valuations may look a lot more rosey, especially if the current Government adopts an inflationary economic strategy that drives down USS liabilities.

But surely the clinching argument for some peace and quiet is the progress that has already been made by the UCU in winning the intellectual argument. As an open scheme there is no rationale for the proposed de-risking strategy that has caused so much strife.

CDC lifecycle

I can, as a former First Actuarial employee, point to the absolute good sense of exploiting the sweet spot that USS is and will remain in.

USS should remain invested in real assets, teachers should remain teaching and the long-suffering students should be allowed to complete this year without further disruption.

Cambridge colleges


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Pension tax-relief – a fact based argument for change.

Screenshot 2020-01-12 at 08.26.34.png


The change I am suggesting would turn pension taxation on its head, it would mean pension contributions would be taxed at more than 60% for high earners but that the lowest earners would be exempt from pension taxation.  Pension providers would need to pay attention to their low-earners who would become more valuable to them, providers whose models were focussed on wealth management would suffer from these proposals. Read to the end to understand why I see such change as needed.

In recent articles, I , Ros Altmann and Jo Cumbo have been grappling with pension tax reform. There are three solutions to the issues.

The first is to deny there is a problem , or at least to put off accepting we need to tackle the problem (this sounds familiar in the context of climate change).

The second is to look at a partial solution, the solution favoured by unlikely bedfellows in John Ralfe and Ros Altmann, here the key is to limit tax relief to a flat incentive.

The third is what I propose which is a phased transition from the current system where contributions get incentivised to a system where pensions are paid tax free.

In this blog, I look at the available numbers, published by the Government – that show us – on an accounting basis, how the amount that Government loses in tax relief exceeds the amount it rakes in from taxing pension saving by £35.4 bn (2017). Ros Altmann estimates that the real cost today has gone up since then to around £50bn, but I’ll stick with the lower estimate, as detailed below.

Screenshot 2020-01-11 at 16.07.31

The table has been converted to a graph which shows where the £35.4 bn is lost

Screenshot 2020-01-11 at 16.36.53

DB funding costs best part of £18bn,

The graph shows that the biggest cost by far, is the £18bn a year lost in tax revenues from employers with occupational pension schemes. This may seem odd to those who see pensions through the lens of auto-enrolment where employers pay 3% of a band of earnings and employees 5%. But in 2017 the rate was still 1+1. and more importantly, the weight of pension contributions is still with DB schemes. The deficit contributions to keep DB going are enormous, the ONS estimated that the 360 largest DB plans paid £13.5bn in special contributions in 2018 (and they paid ongoing contributions and the PPF levy on top).

DC costs to the pension system are smaller but growing

But we should also be aware that ongoing contributions to Defined benefit schemes dwarf what’s going into workplace DC plans.

Screenshot 2020-01-12 at 06.36.23.png

Look out for the yellow and blue blocks on the right to shoot up as the 2018 and 2019 numbers come in, that’s when the real cost of auto-enrolment to the Treasury arrives.

Lates estimates from the Treasury suggest the  cost of income tax relief for registered pension schemes in 2019/2020 will be  £20.4bn, (“income” covers personal income and corporation tax). Most of this increase is expected to come from DC

Why national insurance is so important

People and employers pay national insurance on salary and bonuses but not on pensions in payment.  Employers do not pay national insurance on contributions to pensions. Although national insurance is not a headline grabber (like income and corporation tax) it forms a big part of the £35.4bn gap between what Govt. gives up and what it grabs back



The figures in Table 6 at the top , need no graph, in terms of “give and grab”, the Government gives up £16bn in national insurance and grabs nothing back. National Insurance makes up nearly half of the gap between give and grab.

Although Table 6 is the last complete figures , we do have provisional data. The latest data from the tax office reveals national insurance relief for employer pension contributions will amount to £18.7bn, higher than the 2018/19 figure of £17.4bn, and the 2014/15 figure of  £13.8bn figure.

So what can Government do?

On the face of it, the ongoing cost of funding DB and the cost to the exchequer of lost NI revenues are the two biggest ticket items,  The DC costs are yet to feed through.

The current plan is to cap the amount of contributions that those with high net disposable incomes can make and punitively tax breaches . This is through the annual allowance, the taper and to some extent the money purchase annual allowance.  Coupled with a cap on the value of lifetime pensions benefits this has produced an increased “grab” from the wealthy illustrated below.



Screenshot 2020-01-11 at 16.43.25

But these breaches aren’t really netting much in “grab” compared with the “give” elsewhere.

What the Government has to do is to find a way to stop giving away so much upfront and boost the impact of the “give” by not grabbing back in retirement.

The reason for this is that 50% of the benefit of the current “give” is going to 10% of the population and the 90% of the rest of us , are sharing in only half that £35.4bn giveaway.

The beneficiaries of that big employer spend are those still getting DB accrual and those benefiting from DB pensions that increase each year. There is an argument that DB pensions should be liable to national insurance by way of “grab” . I don’t see such a measure as being popular, but it may be a short-term fix to keep the show on the road and pay for removing the annual allowance taper. These tinkerings are not the long-term solution

Making DB accrual benefit low-earners most.

What  needs to happen is that we need to gradually remove all the perks of accruing DB (both in the private and public sector) and charge those who are in receipt of DB accrual the cost of both the income tax and national insurance give , in exchange for paying this accrual tax free at retirement. This can be done , not by increasing payroll taxes but by offsetting the upfront tax and NI reliefs by a promise that this part of the DB accrual will be paid tax free – effectively a tax-exempt pension.

Why this works is that it redistributes the incentives to stay in to those who pay small amounts of tax and NI and takes away from those who are the big winners today, those 10% of top earners who are scooping the pool.

Preventing DC becoming a national insurance arbitrage.

As for DC, we have to be aware that most DC contributions will ultimately be paid by employers

Screenshot 2020-01-11 at 16.39.36

Employers are cottoning on to salary sacrifice/exchange and can see that they can boost pension contributions by up to a quarter by simply paying employee contributions in lieu of salary.

This graph shows how fast the switch is happening and when the vast new cohort of employers (1m +) who have recently set up workplace plans, cotton on to this, the amount of personal contributions will fall further.

If Government chooses to cap tax- relief on personal contributions to the lower rate , they will see that blue line accelerate towards zero as employer contributions protect all employees from income tax (as well as NI).

This is why a flat-rate solutions as proposed by most pension experts is flawed.

As with DB, the solution is to treat pension contributions as tax- able and liable to national insurance as if they were a benefit in kind. In the short- term, contributions could carry on getting tax-relief but would be “docked” by providers who would send the tax and national insurance  on  to HMRC.

This could mean that a higher rate tax-payer would only get around 39 p invested for £1 received by the provider. (45% income tax + 2% employee national insurance and 13.8% employer national insurance would be returned).

By contrast, 100% of the contributions for those on the lowest earnings (below both tax and national insurance thresholds would be invested.

Both the highest and lowest earners would see 100% of their savings available to them in retirement tax free, but the lower earner would benefit to the tune of 61p in the pound over his or her wealthy colleagues.

Impact on pension savings

The impact of my proposals will be extremely unpopular with most people reading this blog, who will benefit from the status quo and could stomach a flat rate incentive system.

Not only will it dramatically reduce pensions for the rich but it will slash revenue projections for many pension providers that depend for their profitability on an ad-valorem fee on wealth. Put simply , it will turn round the pensions value propositions from rich to poor, from wealth management to social insurance.

One test of this Government will be to see whether they will actually sort out pension tax relief as dramatically as  I propose. I propose that if they do, they look at incentivising people to convert their pension pots into pensions by providing tax-breaks to CDC schemes to manage people’s pensions as an alternative  to annuity, drawdown or simply cashing out the pot and putting the money in the bank.

The incentives for CDC provision could be equally geared to benefit those with small transfers so that the Government can make CDC viable for everybody, with the option for the wealthy to go their own way without imperilling the CDC scheme. As I have mentioned earlier, the first national CDC scheme could be seeded by the PPF and run by the PPF’s outstanding investment and operational teams.

I believe that in the long-term, my proposals will strengthen the UK pension system and return it to its former state of being the envy of the world. It will make pensions more inclusive and more relevant. Instead of being a “tax-wrapper” , the DC pension pot will become measurable by the CDC pension it can buy. DB pensions accrual will be valued for whom it is valuable and will increasingly be swapped for a CDC benefit based on a defined contribution.

Those who these proposals would benefit, won’t realise at first just how much they will get from this change. Those 1.7m people caught in the net-pay rip-off , don’t know how they are being ripped-off and have no voice. Those caught by the taper are the other way round, they have a loud voice and get their way.

But – with proper promotion, I believe these proposals will receive popular support. It will take a lot of time, energy and bravery to see these proposals through and the people who have most to lose from these proposals are going to be a huge barrier to change.

Those who will see the value of their future DB accrual , their future DC savings reduced, will not like my proposals. They will argue that it will destroy confidence in the pension system and many will opt-out and prefer to be paid salary in lieu.

Impact on employers

But employers will not be impacted by my proposals and will be under no obligation to feather-bed these cuts in top-earners pensions. As this system would be imposed on a national basis, the high-earners wanting out would need to find a country where they could get better. As far as I am aware, no country is currently giving away more in tax relief to the wealthy than Britain, so they will be hard pushed.

Employers will not be taxed  on their DB funding (or indeed on special contributions), they will not be impacted by the administration of the tax rebating which will fall to pension administrators not payroll.

My proposals should be welcomed by employers and their trade bodies , the CBI and the FSB alike.

Impact on the Health Service

My proposals will generate a substantial reduction in the cost of pension tax relief. It will especially negate the cost of tax-free cash (all future accrual or savings to pensions will be tax-free). The money saved can be recycled to encouraging the use of CDC pensions and to help pay for the cost of long-term care of our fast dementing  and physically detoriating elderly. This proposal will go some way towards increasing the £230bn a year we spend on the NHS.



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

The best article on finding lost pensions, I’ve ever read.

This article appeared in Money Mail on new year’s eve and it’s by Ben Wilkinson. It’s an example of how journalism can be really helpful, and it’s an inspiration for me at AgeWage to make sure we’re on the list of apps that help people out – this time next year! You can read  original here

Join the Pension Hunters: With up to £20BILLION of savings feared lost, here’s how to track down your missing pot

  • Auto-enrolment has turned millions of workers into pension savers
  • The PPI has said there could be around £19.4billion waiting to be claimed
  • New money apps for smartphones can help workers pull together their pensions 

Every penny of your pension counts in retirement, yet it is feared that savers have lost track of pots worth as much as £20billion.

But how do you track down a lost pension or even know you’re missing one?

The average person has 11 jobs in their lifetime, so it is no wonder two in three Britons have more than one pension pot.

Finance worker Lisa Bedford had previously spent a decade working for a blind company, but had lost track of her old pension provider. When her husband Mark, 52, opened up a self-invested personal pension with AJ Bell, the couple decided to track down Lisa’s old pot


Finance worker Lisa Bedford had previously spent a decade working for a blind company, but had lost track of her old pension provider. When her husband Mark, 52, opened up a self-invested personal pension with AJ Bell, the couple decided to track down Lisa’s old pot


The industry has long discussed launching an online pensions dashboard which will allow savers to view all their pots in one place. But without one yet in place, Money Mail explains how you can turn detective to find a hidden fortune…

Revisit Past Jobs

Auto-enrolment has turned millions of workers into pension savers, but it also means many will have been saving into pots without realising.

The Pensions Policy Institute (PPI) has predicted that even more pots will be lost thanks to auto-enrolment and the increased frequency with which younger workers move homes and jobs.

If someone leaves a job they might lose contact with their pension provider. And if they move house they might forget to notify all of their previous pension providers of their new address. So if you want to hunt down your retirement savings, start by retracing all your previous jobs.

Former pensions minister Steve Webb, now director of policy at Royal London, says: ‘Go through your work history and check if you were a member of a pension scheme for each of your past jobs. Try to track down former colleagues who may have contact details for the provider.’

Dig Out Clues

Old payslips or P60s could provide clues as to whether you were a member of a pension scheme in a previous job.

The National Insurance office may also help. Many workplace pension schemes were ‘contracted out’ of the state pension scheme. HMRC should, therefore, have records of this, and this could be a way of proving to a pension provider that you were a member of its scheme at the time.

You can also use the Government’s free Pension Tracing Service. This now receives 40,000 requests every week.

The service should provide you with contact details for the pension scheme or provider if you give the name of your former employer. But do not confuse this free service with others you can find on the internet that may charge.

Finance worker Lisa Bedford had previously spent a decade working for a blind company, but had lost track of her old pension provider.

Sales worker Andy Cocker used PensionBee to trace three pension pots worth more than £20,000 in total


Sales worker Andy Cocker used PensionBee to trace three pension pots worth more than £20,000 in total

When her husband Mark, 52, opened up a self-invested personal pension with AJ Bell, the couple decided to track down Lisa’s old pot. However, after looking for old paperwork, Lisa, from Nuneaton in Warwickshire, realised she had probably lost her documents when they moved eight years ago.

Fortunately, Mark found the Government’s pension tracing service online.

In February, they entered the name of the blind company Lisa had worked for and found a match to a pension provider, which Lisa then contacted about her savings.

Lisa, 48, says: ‘I was worried because I couldn’t remember who my old pension provider was.

‘You never think about these things when you are younger and it was only when Mark started looking at his pension that I started thinking about mine.’

However, just because you were once a member of a scheme in the past, it does not mean you are entitled to a pension — you may have transferred out of one scheme into another, or ‘cashed out’.

Try New Apps

New money apps for smartphones can also help workers pull together their pensions.

Customer service staff at apps such as Moneybox Pension and PensionBee might be able to help track down pensions for you.

The apps let you transfer old pensions into one pot and choose where to invest it. Sales worker Andy Cocker used PensionBee to trace three pension pots worth more than £20,000 in total — including a private scheme he didn’t even remember setting up.

The 49-year-old from Rochester, in Kent, had lost his documents and couldn’t remember the providers of his previous pension schemes.

The father-of-four served in the Army with the Royal Electrical and Mechanical Engineers, before working as a self-employed electrician. He went on to work for two different companies which sold industrial supplies, and joined a similar company just a few months ago.

But when he heard an advert on the radio for PensionBee he decided to use the service to trace his lost pots.

After submitting a few details, such as his name, address and date of birth, he was sent information about three traced pots within four weeks. One contained £5,000; another was worth about £14,000; and a small private pension he did not remember setting up was found to contain £1,500.

He says: ‘The private pension was a real surprise, as I couldn’t even remember setting it up.

‘I’m glad I have tracked them all down and pulled them together — and I’ve encouraged my 27-year-old daughter to do the same.’

Research from Moneybox found that half of those surveyed did not know the providers of their old pension pots, and more than 84 pc felt their pension provider was not keeping them well informed.

David Brightman, 32, from London, used Moneybox to help find and transfer all his old pensions into one investment.

The software product manager says he found he had about £14,000 in old pensions. He says: ‘I had pots I had no idea about or had not thought to look at.’

Help is Coming

A decade ago the Department for Work and Pensions (DWP) estimated that savers had lost track of around £3billion. Yet the PPI has more recently said there could be as much as £19.4billion waiting to be claimed, with the average missing pot worth £12,670

A decade ago the Department for Work and Pensions (DWP) estimated that savers had lost track of around £3billion. Yet the PPI has more recently said there could be as much as £19.4billion waiting to be claimed, with the average missing pot worth £12,670

Industry estimates vary on how much money is sitting in neglected pension pots.

A decade ago the Department for Work and Pensions (DWP) estimated that savers had lost track of around £3billion.

Yet the PPI has more recently said there could be as much as £19.4billion waiting to be claimed, with the average missing pot worth £12,670.

Mutual Royal London last year said it had spent more than £2million reuniting 36,000 customers with policies that totalled more than £14million.

Pension dashboards are expected to help millions of Britons manage their pensions. When launched, savers will be able to view all of their pots on one page.

But the service, which was supposed to be up and running last year, has been delayed.

Steven Cameron, pensions director at Aegon, says: ‘Now the political uncertainty around the General Election has passed, the Government should get pension dashboards up and running.

‘Pension dashboards will show all pensions together at the touch of a screen, reducing the risk of losing track of any pensions.’

Mr Webb adds: ‘The pensions dashboard should help people find more of their lost pensions, but if scheme data is imperfect there will still be gaps. It will still be necessary to turn into something of a private detective in order to track down all of your missing pots.’

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How the UK could lead the world – supporting older people.

Josephine Cumbo continues to write with precision about the need for reform of the pension taxation system. If you can’t read her latest article, perhaps you should think of subscribing to the FT – at least to read her output over the past three years. I’m writing this blog for two people especially, Jo Cumbo and Baroness Ros Altmann – who have influenced my thinking about pensions more than most! Both are thinking big thoughts about pension delivery, and both are considering reform.

The case for reform

  1. Current tax concessions that should be encouraging those at the top of organisations to promote pensions , have been so curtailed that many high earners view the pension taxation system with resentment.
  2. The vast majority of the £50bn lost to the exchequer from the various pension tax-reliefs is benefiting those who are likely to be wealthy in retirement
  3. Those on low incomes are not being incentivised to save by tax, and indeed are often missing out on promised incentives.

So fundamental are these problems, that I have argued we need to think from the bottom up about how we allocate money to solve the problems of the nation’s ageing society.

These problems are simple. People are living longer and are more expensive to the state in extreme old age. Longevity is a problem of dependency , the old on the young, those in retirement on those in work. Ultimately we are going to have to re-prioritise who is paying for who.

What is going right

There are large parts of the pension system that are going well. This week, the PPF rescued the 1000th group of pension scheme members who could not be supported by failing employers. The PPF is a great success.

Secondly, we have a state pension that is simpler and more generous than it was. It provides a much more meaningful safety net and it means that together with universal credit, deep poverty amongst the old is reducing.

Thirdly, we are beginning to rebuild a more democratic retirement savings program where nearly everybody is “in”, albeit not in it so deep as the lucky few still accruing a defined benefit.

What is going wrong

I have three major issues with UK pension system

Firstly, it treats pensions and health independently, the increasing problems of our NHS are mainly because of the failing health of pensioners. Those in work are picking up two bills, the bill for pensions tax relief and the bill for the strain on the NHS. The two bills should become one. We need to think about prioritising the NHS and diverting the money that makes people like me wealthy, towards paying for people like my later life healthcare.

Secondly, we need to make private pensions popular for everyone. Right now, the millions of new pension savers, auto-enrolled into their savings plans, are not appreciating their savings. Pensions are just another deduction from the payslip. Those who don’t pay tax and those who pay basic rate tax benefit from contribution reliefs at between 0% and 20%. Meanwhile those who are on higher earnings get contribution tax-relief at between 40 and 45%. The benefits of tax free growth are similarly skewed towards those who pay higher rates of income tax, those who pay CGT and those with inheritance tax liabilities. Small wonder that those on low-earnings don’t value their pension savings.

My third issue is that as a nation we have lost the focus of saving for retirement which has always been to be able to become independent of work from having an independent wage in retirement. We increasingly talk of our pension in terms of wealth and not in terms of lifetime income and this has broken the link between work and later life social security.  Private pensions has been hi-jacked by the financial services industry and are now part of “wealth management”.

Why pensions will never be ISAs

Earlier in the week, I took issue with Baroness Altmann and she took issue with me!

I said that her solutions to the radical overhaul of pension she was proposing were not fundamental. She said that my solution would destroy the pension system by turning pensions into ISAs.

But here is where I have a card up my sleeve. My solution to the great reform of pension is do three things

  1. Turn the tax privileges of pensions around by changing the relief system to TEE
  2. Transition from EET by extending scheme pays
  3. Establishing CDC as the default decumulator with annuities and drawdown as alternatives for the financially sophisticated.

And here I declare that I would abolish the “freedom” to cash-out pension savings other than in extreme circumstances. I would keep the capacity to withdraw 25% of the “pension pot” but I would not incentivise people to do so , by giving this 25% further tax privileges. In my view of the future, all income from annuities, from drawdown, but primarily from CDC pensions would be paid tax-free, as would any initial lump sum.

Why CDC is an “in-retirement” solution

The savings system we have in this country , which is increasingly known as “workplace pensions” but which is more exactly “defined contribution” no longer purchases pensions . It is not “money purchase” and hasn’t been since George Osborne announced in 2014 that no-one would every have to buy an annuity again.

But – as a means of building up wealth for retirement – it is working very well. I am proposing that we return DC to “money purchase” by creating a system of CDC pensions into which people can transfer their DC pots in exchange for a wage for life- paid by the CDC provider.

I propose that the Government is as bold in setting up a CDC provider, as it was in setting up NEST. Indeed I see NEST as being extended into the Government’s CDC provider. I see the Government’s CDC provider as already in existence. It is the payer of pensions to the members of a thousand pension schemes. It is the PPF.

 CDC and the PPF

In the early days of  planning for auto-enrolment, people confused auto-enrolment and NEST and used the two interchangeably. It was only when auto-enrolment got going that rivals to NEST emerged and we got the competitive market we have today.

I see the next decade as one where we have the same dynamic in decumulation. If the Government has the courage to get behind CDC as a way of turning DC pots into a wage for life, then it should convert the PPF into a seeded CDC pension scheme (ring-fencing the PPF’s current membership who will continue to enjoy guaranteed pensions.

The non guaranteed part of the PPF will take money in from private individuals (in their millions) and pay pensions – according to the PPF’s capacity to pay those pensions. My guess is that the PPF will pay quite low pensions because the PPF is uber-cautious. My guess is that people will be prepared to look beyond the PPF and they will find a variety of private alternatives ranging from the raciest drawdown promises to the most sedate of annuities. They will be able to choose how they want their retirement wages paid to them but the benchmark will be the PPF.

A system depending on “open finance”

My vision for the future is underpinned by technology. For me, “open pensions” means that we will be able to see our retirement plan building over our working lives , and to see that – as we will see everything – delivered to us by digital technology.  We need open finance to get open pensions. As with CDC, the Government are getting this.

I don’t know what the device will be, or how far we will deliver via smart contracts and whether something new will come along which will make our current thinking about delivery redundant. I suspect that how we get our information, take our decisions and get paid in retirement will be radically different to what happens now.

But I am sure that whatever the Government’s current vision for the dashboard is, it will be obsolescent by the time it delivers it and that technology will deliver much of what I have been talking about in this blog.

Technology will deliver the means for the Treasury to plan the move from EET to TEE and re-prioritise tax to both incentivise savings and save our NHS

Technology will help pension providers and payroll manage the impact of transitioning from EET to TEE

Technology will help us find our pensions (the basis of the pensions dashboard)

Technology will power open pensions that will enable to convert pension pots into retirement plans.

Technology will ensure that CDC is set up fairly , with Smart Contracts, between all current and future participants to ensure sustainability

Technology will drive innovation in the market to allow the private sector to compete against the PPF for in retirement wealth.

Technology will allow ordinary people to balance the books so that they can spend their retirement not having to worry (so much) about money.

Making Britain #1 for pensions once again

Free-flowing information will be at the heart of this. Information is data, data will mean we have the money we need at the right time and in the right place.

It will mean that we will have a more certain and more sustainable system of long-term care.

Crucially, without the guarantees of state pensions, defined benefit pension schemes and annuities, we will be able to integrate the funding of our great infrastructure projects, especially our NHS, into a financial model that is driven by Britain’s productivity.

We are in a position now to think outside the constraints of European law and establish a solution for the latter part of this decade and the decades to come which is world-beating.

A note for Guy Opperman

I know that some people in the DWP read my blog and I hope that from time to time , some of my ideas may filter up to the Pensions Minister.

Guy Opperman is someone who has sponsored CDC through to the Pension Schemes Bill and for that he deserves great credit. He has also helped keep the vision for the Pension Dashboard alive – I thank him for that.

Now I give him a third challenge. I challenge him to work with HMT on this great issue of pension taxation.  I challenge him to work with other departments , especially the department of Health, to work towards a joined up solution to the problems the current generation, my generation and future generations are facing  and will face as we get old.

When Guy Opperman came into the job of pensions minister , he told us he was doing the job for the job’s sake. He said he was doing it to extend pension’s reach to those currently excluded. He has been true to his word.

He now finds himself with the opportunity to become the longest serving Pensions Minister in living memory. He is part of a strong Government with a fixed term of five years ahead of him. There is a (relatively) open legislative opportunity ahead of him.

He has people in Government , such as Ros Altmann who can help him. I send him this message. There are plenty of people like me who want to see Britain become #1 in the world , in the way we manage our pension system. We want our healthcare system to be #1 in the world too.

Let’s make it happen.

Posted in age wage, guy opperman, pensions | Tagged , , , , | 2 Comments

Time to stop dissing Robo-Advice?

science 2

In a brilliant article , which you may be quick enough to access via this link, the FT’s Damian Fantano explores what is going on with robo-advice – or what robo-advisers like to call “putting the AI into financial advice”.

My take, and the thrust of this article, is that we can already see in the new ways of doing things, a way to navigate what seems complicated – so that it becomes simple.

What “artificial intelligence” is supposed to do is to lead you from screen to screen with the deftest of nudges to a leading question, that question leads to you making a financial decision.

There is nothing new about the “user journey”. TS Eliot explores one at the beginning of the Lovesong of J Alred Prufrock

Let us go, through certain half-deserted streets,
Streets that follow like a tedious argument
Of insidious intent
To lead you to an overwhelming question …
Clearly tired of beating around the bush, Prufrock blurts out
Oh, do not ask, “What is it?”
Let us go and make our visit.
What Robo- Advice should do – is allow ordinary people who do not want to see a financial advisor in person to get on with it.

People know what’s going on…

In its call for input on RDR and FAMR in May last year, the FCA sounded confident

There was a statistically significant increase in the number of people taking regulated financial advice since 2017, with an additional 1.3m people taking advice. There was also a significant increase in the use of guidance services, and automated-advice services, to help with financial planning decisions.

In the detail of their findings it’s clear people are confident too

Of people who have not taken regulated financial advice in the last 12 months, but whose circumstances suggest there may be a need for advice (defined as people who have at least £10,000 in savings and/or investments):

– the most frequent reason (50% of responses) was that they did not feel they had a need to use an adviser during this time

– a further 37% said they felt able to decide what to do with their own money (significantly higher than the 28% who said the same in 2017)

– less than 1% said they had not been able to find an adviser,

2% they did not know how to find an adviser

and 5% said they had doubts about whether they could find an adviser suitable for them

Is lack of advice really the problem?

On the face of it – there doesn’t sound like a huge unsatisfied market here. People are making their way through the streets and taking on the “overwhelming questions” with their own resources.

The answer to that question is that it depends where you look. If you read the FT you are looking in the right place, you generally have more than £10,000 in “savings and investments” and the people who consult the AI – advisers featured in the article are financial journalists who are very aware of what is going on.

This is Damian Fanato’s personal experience

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AI Advisers or Robo lead-generators?

Buried in that user journey are a number of “monetisable”  opportunities for the advisers to make money via referrals, on top of the £2 per month licence fee to get more of the same.

The inference is that robo-advice was little more than a shop-window for Alexander Hall.  No doubt, proprietary solutions are also available where there is “wealth” on offer, as the robo- adviser – Eva – is a “wealth-wizard”.

There is a difficulty here and it’s about the audience. The FT is talking to its own and as such it is allowing us to smugly dismiss Eva as a financial tour guide. Damian suspects that Eva wasn’t ever going to arrange a mortgage herself and that when it comes to the “overwhelming question” , we are not in the world of driverless – underwriting.

This is not always the case, artificial intelligence is being employed in insurance and much of the rate-setting on the price comparison sites recognises good and bad risk with reference to big-data and even the applicant’s behaviour. Sinister as it sounds, getting cheap life-cover like maximising your annuity, is all about knowing the right answers.

It’s time to stop this dissing

We lead busy lives and the advantage of a trusted robot, may at present by little more than Siri, Alexa or Eva’s capacity to navigate us to the right articles or (in Eva’s case) adviser.

Robo-advice may excite in the 50% of FCA responders, a recognition that it might be worth paying a little more attention to their financial planning and maybe take Eva’s advice and trot off to a mortgage broker.

But I suspect that it is considerably more helpful for the 37% of people who said they knew what they were doing, to get a second opinion. For the small remnant who couldn’t find an adviser, some might find Eva invaluable.

And not all of us are FT readers. The knowing tone of the case study suggests that Keith Richards  of the Personal Finance Society  is preaching to the converted (here he is quoted in the article)

“Given the communication skills and empathy needed to fulfil the entire role of a professional financial adviser, it is unlikely that AI will be able to replicate this any time soon, understanding [a client’s] goals for themselves and their wider family; how their finances fit in with their career; educating them about their investments and helping them understand how they are going to manage different risks.”

For the richer more sophisticated FT reader, this is undoubtedly right, but this empathic advisory service is something that Eva could develop, given a chance to get to know her users.

I suspect that the lifetime advantage of having Eva , in your phone , could become every bit as valuable as the empathic adviser, because Eva has certain key advantages.

Eva does not take holidays and so long as you have battery , she is on hand to help. She is cheap at £2pm and the more you ask her, the better she gets to know you. If Eva really is an AI tool, she will not just become trusted, but more trustworthy, as you get to know her.

Having read through the article, I’m getting to the point where I would like to have Eva in my pocket, and if I’m proved wrong after a couple of months, she has cost me what I pay for most of my interesting conversations – a cup of coffee.

So I’m not dissing Eva, or robo advice – I am asking the question – “how do I meet Eva?”

How do I meet Eva?

It would appear my best chance of meeting Eva for free is by joining  a firm like Unilever, who make her available to their staff – presumably as an employee benefit. I may be able to find Eva by myself (I do know some of the good people at Wealth Wizards) and I’ve even got a link to visit myEva

And I’m sure that I can get hold of other versions of Eva at Multiply.ai, or one of the firms using the Abaka platform

If J Alfred Prufrock was alive today, I am sure he is the inquisitive cove who’d be asking overwhelming questions with artificial intelligence. I felt like this – which is why I started AgeWage.

agewage evolve 1


I am quite sure that vast numbers of people  today navigating  the  treacherous waters  at retirement will look for whatever online friend they can.

There is an urgent need for Eva, or those like it. Our customers are impatient and like Prufrock, they want to get on with it.

Oh, do not ask, “What is it?”
Let us go and make our visit.

agewage advice


Posted in accountants, age wage, pensions | Tagged , , , , , , | 4 Comments

Will open finance transform financial services?

open finance


In case we had any doubt what the answer should be, the Financial Conduct Authority asked for “proposals on how open finance could transform financial services”. There were other words for ‘how’ such as whether or if, but how was chosen.

I will go a stage further than the regulator and transform that ‘could’ to ‘will’ – open finance will transform financial services.

Open finance is defined by the FCA as “the sharing of data that provides new ways for customers and businesses to make the most of their money”. The most obvious manifestation of open finance is the proposed pensions dashboard, a concept that assumes that we will be able to find, compare and aggregate our savings, turning pension pots into a retirement plan.

The success of open banking has already inspired first-movers. Abaka, the open finance platform, recently announced a successful $6.2m (£4.7m) funding round. Other open finance ventures such as PensionBee, AgeWage and Multiply AI have similarly received substantial funding.Screenshot 2020-01-09 at 07.33.13.png

The key to unlocking data is the mandating of those holding data to make it available on demand in machine-readable format. This will require the adoption of data standards and the use of application programming interfaces by all who manage pension data.

Supply side takes first steps

This process of standardisation is already under way. Last year, customers of Lloyds Bank with Scottish Widows policies started seeing pensions on their bank statements.

A further manifestation is the simplified pension statement being proposed by the Department for Work and Pensions after work from Ruston Smith. The DWP’s consultation paper on how we get standardisation ties in with work on cost and charges disclosure, which itself has been greatly simplified by the FCA.

But this momentum on the supply side is in advance of, rather than because of, consumer demand. The public’s apathy towards pensions is reinforced by each pension information pack stuck in the letterbox. This doormat debris is generally returned to sender – marked “gone-away”.

While progressive providers like Phoenix aspire to universal digital contact with policyholders, most occupational pension administrators know no more of members than the members know of them. Pensions are strangers to our phones.

There is no effective pension-finding service and – in its absence – the DWP estimates that by 2050, Britain could find itself with 50m abandoned pension pots. Last year the Pensions Policy Institute calculated £20bn of pension savings had gone unclaimed. The public’s expectations from their pensions are so low that this appalling state of affairs is allowed to continue without outcry.

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Open pensions gather little enthusiasmThe financial services industry knows very well the consequences of depriving its customers of information. Payment protection insurance has been to the banks what pensions mis-selling was to the insurers. Having swallowed such bitter pills, you would have thought lessons would have been learned that full upfront disclosure is a risk mitigator.

Despite this, there is little enthusiasm among pension administrators for open pensions. PensionBee’s Robin Hood Index has shown that even a customer’s letter of authority can be routinely ignored by providers who care more for internal protocols than meeting customer requests.

For many administrators, empowering consumers with data means a mailbag of complaints about data quality, and a threat to revenues when service-level agreements are breached.

But returning to my optimistic theme, I see change. The various barriers put in the way of data requests, including calls for independent financial advisers, ‘wet’ signatures, and even proof of identity will be swept away when the dashboard standards are implemented.

When they are, I suggest people will start regarding their pension pots as every bit as real as their money in the bank or under the mattress. When people take back ownership of their money, they will probably ask questions about how that money has been managed, costs and charges extracted, and whether the value has been worth the money.

Behind the FCA’s open finance agenda is an assumption that financial services will need to “come clean” and be held accountable. Whenever it happens, open finance will open a window to sunlight, and sunlight is the best disinfectant.

This article was first published in Pensions Expert.

Thanks to Maria and  Angus

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“Is the fund industry morally bankrupt?”

hospital 2

Waiting for you number to come up

It is 80 years since the United States set down the Investment Act that established four principles on which fund governance sits.

Fund governance refers to a system of checks and balances and work performed by the governing body (board) of an investment fund to ensure that the fund is operated in the best interests of the fund and its investors.

The objective of fund governance is to uphold the regulatory principles commonly known as the four pillars of investor protection . The final  principle states that the investment fund

“will be managed for the benefit of the fund’s shareholders and not its service providers”.

How can we justify fund manager rents?

Yesterday I sat with 84 others in Guy’s hospital for an appointment that did not happen. The NHS is overstretched , underfunded and under-performing. For the second consecutive quarter I would not be seen, nor many like me.

While standing in the waiting room (there were hardly chairs enough for those who could not stand), I spoke with Lucy White of the Daily Mail who wanted to know my views on the £13.8m extracted by Neil Woodford and his partner or the £84m shipped out to Mauritius by Terry Smith.

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Let’s be clear, these gents are talented and have got to the positions where they can get paid so much, because they have earned the trust of their investors

Smith Train and Woodford did not set out to break any of the principles of fund governance, but they have ended up  putting their interests first.

The rents they are extracting from their funds cannot be justified to their investors.

As I sat miserably with  84 people  in an NHS outpatients facility, I could not justify these monies ending up being taxed in Mauritius,

Which is why I gave this verdict on the  Investment Association’s Mr Cummings for defending the indefensible.

‘The last study of asset managers’ profit margins by the regulator showed they were taking 36pc. That’s ridiculously high.

‘Whenever I walk through the City, I see people staggering out of posh restaurants after entertaining each other.

‘It’s the way it’s always been, but the Investment Association expects us to be happy because it’s getting a bit cheaper to invest? It’s not good enough that Cummings keeps endorsing this behaviour.’

You may call that jibe about “posh restaurants” exaggerated, maybe it was the site of the misery  I saw around me that excited me, but this is a metaphor for how ordinary people see what Mr Cummings Investment Association condones.

Here is the Investment Associations  statement to  Lucy White

 ‘Fund charges and costs are more transparent than ever, and the industry is doing further work to ensure information is clear and understandable.

‘Fees are falling and it’s never been cheaper to be a fund investor. This is a positive trend we expect to continue.’

These words rung hollow to me yesterday afternoon. I could better relate to Alan Miller’s assessment;

‘The Investment Association is no more than a self-serving, intellectually and morally bankrupt mouthpiece for the industry.

‘It has resolutely tried to defend the indefensible and is completely devoid of principles, ethics or integrity.

This is not the politics of envy but a statement on ESG

The principles of the 1940 Investment Act stand good, on them has been built a framework of governance which we know as ESG. The “G” includes ensuring that the management of the companies invested in do not extract undue sums at the expense of shareholders and the “S” stands for their behaving in a way that improves society.

Shipping your money off to Mauritius Mr Smith, avoid your paying the UK taxes where your money was earned. It sends a solicitous message to companies who do not pay their UK taxes but shelter profits in similar exotic destinations. How can you look the management of those companies in the face and tell them to exercise ESG, when you aren’t?

Smith, Train and Woodford have been the doyens of not just the fund industry, but of all who advise on funds. I have praised Terry Smith on this blog and I have huge admiration for the way he runs his funds, but I’m no fan of a 1% AMC if it results in £84m being packed off to Mauritius. What kind of an example is that?

All the work that Share Action, Pirc and Minerva- Manifest do to clean up our boardrooms is unravelled by these men.

Every other manager in the City will look at those numbers and justify their high bonuses against them, so will the army of advisers, brokers, custodians, lawyers, accountants and marketeers who feed at their table.

Money will continue to be shipped out to Cayman, Mauritius or even the Channel Isles and our public services will be the poorer for it.

The lessons of the Asset Management Market Study are yet to be learned

The FCA’s asset management market study presented evidence of weak price competition in many areas of the asset management industry. This means lower returns for savers, pensioners and other investors.

Although it led to a referral to the Competition and Markets Authority, it did not lead to a change in culture among fund managers and evidence of this is the exorbitant amounts paid to Woodford and his business partner. So incompetent was Mr Cummings in defending them that he actually claimed they were being paid so much for their outperformance! The payment of £13.8 m was paid to them as their fund crashed into oblivion! Lower returns for savers, pensioners and other investors indeed.

The terms of reference for the FCA’s market study were published in 2015, the report was published in 2017 and these bonsues were paid  between 2017 and 2019.

The remedies the FCA put in place in 2017 were

  • measures to give protection to investors who are less able to find better value
  • measures to drive competitive pressure on asset managers
  • proposals to improve the effectiveness of intermediaries

It is possible for investors to avoid the high rents of those who run active funds so they can get better value, it is possible to find managers who have responded to pressure and you can find intermediaries who will be effective in getting you to the right place.

But three years after the Asset Management Market Study, there is still nothing to stop fund managers taking ridiculous sums for the management of our money and nothing stopping them shipping it off to Mauritius,

Nothing that is , but the outrage of Lucy White  and her readers. If the FCA cannot rid us of these bad practices, if intermediaries condone and replicate them , then it is up to investors and the press to name and shame them. That is not an ideal means of change, but it seems it is all we are left with.

I would like that money back in the UK and properly taxed.  That tax should ensure that people who sit in NHS outpatient departments have doctors to see them. I would like the managers of our money to look the managers of our investments in the eye and tell them not to over pay themselves and to pay their and their company’s taxes – properly.


There are not enough doctors for patients

Posted in advice gap, age wage, pensions | Tagged , , , , , | 3 Comments

Ros is right – birthday card’s get read – and so does she.

Plenty of us have been thinking about how to make that annual statement that we get about our pensions stick in our minds, so that we understand what we have. One person speaks to and for the nation on pensions and she is Ros Altmann.

Maybe I have Ros Altmann on the brain, which is no bad thing if your job is to find ways to reach ordinary people who don’t care for pensions.

Those thinking I’m a signed up member of the Baroness’ fan club need to appreciate I don’t always think she’s right, but when she’s wrong, she’s wrong in a constructive way!

And when she’s right, she’s big-time right, as she is in this amazing article in This is Money.  Those who know Hank Williams, will know his songs are right in a Ros Altmann kind of way.

She’s written an article in This is Money about birthday cards. The idea is simple, if we sent personalised simple pension statements as a birthday card, they would get read. And we know she is absolutely right;

This is what happens when someone with a powerful emotional intelligence is a genuine pensions expert and likes people.

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Birthday cards get read

Walk into any stationers and the array of colourful cards reminding you to have a happy birthday is the first thing you see.

Writing on his Genesys blog, Paul Richer talks to those in the travel business

Asked which channels or routes to market deliver the best ROI for your business, respondents put Facebook Advertising in first place followed by Google Adwords.  What was surprising was that in third place was Direct Mail, slightly ahead of Email.  Now, I have always thought of Direct Mail as one of the more expensive marketing channels.  Compared to the almost zero cost of email distribution, there are the significant costs of print and postage.  However, if successful marketing is about cutting through the noise then direct mail has characteristics that make it stand out compared to conventional digital channels:

  • A piece of direct mail has innate visibility.  It needs to be picked up off the door mat so it will definitely be seen.

  • Direct mail does not need to compete for attention alongside your competitors calls to action. Your message is more than just a listing or one of many adverts on Google.

  • It has staying power.  Provided it is compelling enough not to be immediately put in the trash, it can sit around for days, providing many opportunities to attract attention.

To translate this into the language we use in our own homes. birthday cards get noticed on the doormat, get stuck on the mantlepiece and get read and they stay in our faces many days after the birthday’s finished.

Why Altmann is head and shoulders the best ambassador pensions has

I recently wrote a response to the DWP’s consultation on standardised pension statements.

I was so busy with my ideas about “Open Finance” that I didn’t stop to listen, as Paul Richer listened, to the people he was writing to. I dissed the DWP’s ideas of sending statements in coloured envelopes and missed the opportunity that Ros intuitively spotted to link a pension statement to that great notification of maturity and longevity – the birthday card.

Ros Altmann is not writing here to the DWP, or pensions experts but to the people who get pension statements, and she does so with ideas and words that mean something to the readers of the popular press, of whom she is the financial doyenne.

She uses ideas that sniffy people like me pass by, and all too often , we walk away from the simple brilliant idea of the birthday card pension statement, because we’re off chasing fairies on Instagram or Tic-Toc.

That is why this bold, brilliant woman is Britain’s number one pension personality.

Ros Altmann refreshes the hearts actuaries cannot reach.

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Right in principle – wrong in practice. Ros Altmann’s tax reforms need more work

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Ros Altmann is bang on the money when proposing we link healthcare and pensions in her most recent blog

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The big picture policy issue for the UK is how to afford a healthcare system that is free at the point of delivery for everyone, including those who suffer chronic health problems in later life.

It is not impossible to see a realignment of Government departments so that we have a department of work and savings and another for health and pensions. If work is how we save, then health is what we spend those savings on. That goes for private individuals who transfer through their pension pots , as much as it does for Government which uses the mechanism of taxation.

Bravely, Altmann is confronting the biggest elephant roaming the state rooms.

  • Could Government commitment to sort out NHS pensions herald radical pension reform? 
  • NHS problems are canary in the coalmine showing need to urgently change pensions tax rules. 
  • Tapered Annual Allowance and Lifetime Allowance should be changed or abolished. 
  • Reforming the £50billion annual cost of pensions tax reliefs (which gives top earners most help) could raise much-needed revenue AND improve pension outcomes.

Most people in the NHS and in pensions are aware of the local problem the Annual Allowance taper is giving high-earning clinicians in the NHS, a broken pension tax system is creating a drop in productivity amongst our most valuable doctors.

The Government has proposed a fix to the AA-taper issue which will be announced on budget day- March 11th

2019/20. The majority (£132.3 billion) of this is revenue funding for spending on day-to-day items such as staff salaries and medicines. (source Kings fund).

This cost of the NHS is set to escalate and part of that escalation will be the cost of refunding monies to doctors who – because of pensions – are finding themselves paying tax on slices of their earnings in excess of 80%.

The elephant that roams the state rooms is bellowing that if we want a world-class national health system, we are going to have to find more money to pay for it. It is also bellowing that the way we are organising pension incentives does not result in alleviating the problems of old age. It results in massive wealth accumulation for the richest in society and it results in low and middle earners finding they have to sell their houses to live in residential care homes.

In short, tax-relief isn’t working and the funding of chronic care for the elderly isn’t working either. We should kill two birds with one stone.

What Ros Altmann is proposing

In her blog, Ros Altmann discusses three options for the Government to reform pension tax-relief to make it less regressive and to free up resources for other things (the NHS is clearly another thing).

The first isn’t controversial, it involves changing  complicated tax -reliefs to a flat rate “one nation” savings incentive where the top-up is set by the Government . A variant of this is simply to abolish higher-rate tax relief though this still poses problems as there are still two rates of tax for the lower earners (20% and 0%).

The second is controversial as it converts auto-enrolment into a compulsory pension contribution system. This would render pension contributions  a tax on earnings – albeit highly hypothecated as we bet the tax back with interest later in life. It would mean that Government could do away with tax-relief – reducing the £50bn considerably.

For either of these measures to work, the tax reliefs would have to be abolished not just for savers, but for sponsors, otherwise savers would just elect to have their sponsors pay their pension contributions (as happens with salary exchange).

This simple avoidance measure has stood  in the way of partial tax-reforms.  It also stands in the way of Ros Altmann’s proposals for it effectively makes pensions a business tax, it is far easier for an employer to pay salary and write it off against corporation tax than pay pensions and not.

To counter this problem, Ros suggests that it is only the auto-enrolment levels of contribution that need be made compulsory (5% from savers and 3% from sponsoring employers). Above those levels Ros Altmann proposes a voluntary incentivised system with a flat rate incentive for all.

But even here, the temptation will be for the contributions to come solely for employers,  even if salary sacrifice/exchange for pension contributions were to be abolished, it is hard to see how scheme rules or employment contracts could be barred from offering non-contributory pensions which would effectively reduce tax-bills (and tax-revenues) to what was paid before the changes.

The third way is Ros’ worst way!

Ros Altmann accepts that there is a third way and she isn’t afraid to talk about it in her blog. She dismisses it as the “worst way”

Turning pension incentives into ISA-style saving would be hugely damaging: Importantly, it would be damaging to replace the current tax relief incentives structure with an ISA-style regime

The biggest issue for Government is not the popularity of ISA style pensions (people like the certainty of ISA taxation) . It is the unpopularity of what they’d do to people’s salaries.

If we were to tax pensions as a benefit in kind – as we tax corporate sponsorship of ISAs, then every pound paid into a pension would reduce take-home by between 0 and 45% of the pension contribution. While it might be argued that this would result in tax-free pensions (under a Taxed- Exempt – Exempt) formulation, the damage this would do to people’s immediate standard of living would be unacceptable.

This is why Osbourne and Cameron were unprepared to put forward such a radical measure before the Brexit vote in 2015/16.

Pension contributions taxed at source?

There is a way to soften the blow and to introduce TEE in stages, it involves an extension of scheme pays to all pensions and would mean that  pension administrators would be sending back to HMRC the part of the contributions they received that were deemed to have arisen from tax relief. This would be a major change and could only work with Real Time Information from HMRC, informing pension administrators and real time payment systems meaning that pension contributions were taxed at source.

It would mean that people’s take home would remain unaltered , but that their investable contributions would be reduced at their marginal tax-rate – whether they came from employer or from them.

Having mulled this idea for four years, it is the only solution that I have seen to the fundamental issues faced by the Government.

TEE would change our taxation system from one where around half is allocated to the top 10% of earners, to one where the pension contribution system favoured the low-earner. There would be minimal impact on DB pensions for the poorest, but future accrual for those in higher tax-brackets would be curtailed. Many high earners would prefer to be paid salary than pension though there could still be marginal advantages for the TEE system, based on national insurance savings which could still prefer pension contributions.

I don’t propose that this mechanism should las for ever, it is artificial and will be messy. It’s purpose would be to transition us from EET to TEE and it should be phased out in a decade. Like MIRAS in reverse, pension contributions should begin to be taxed at a lower rate and gradually direct taxation on “contributions as pay” should be phased in. As direct taxation increases, secondary taxation through the scheme pays mechanism should reduce.

In ten years time, we might barely remember the days of EET, as we have forgotten the days of LAPR , MIRAS and other unnecessary fiscal incentives.

Radical change in pensions must mean radical improvements to the NHS and Long Term Care

I am so close in my thinking to Ros Altmann, that I do not want this blog to seem critical of her position. As always she is saying the things that others do not dare. She is pointing to a new contract between workers, Government, pensioners and the NHS and demanding that the rampaging elephants is tamed. The neglect of successive Governments to reform pension taxation is only making the matter worse.  Reform must come , but it must be true and simple and it must be reform that can survive the attempts of tax-specialists to get round it with complicated avoidance systems,

We must not give way to arguments that say that if we move to a more progressive tax-system, we simply drive the rich offshore. The rich will stay onshore provided they see that there are real societal benefits to this approach. The quid per quo for giving up the current taxation system must be a commitment to reform the funding of long term healthcare so we move towards what has happened in Scotland where people do not fear extreme old age as taking from them their house, their savings and their dignity.

The only acceptable solution to the problems we have with an ageing society is to spend massively on keeping the old comfortable and in dignity in their final years. This can best be achieved by requiring us to pay more while at work for this benefit.

The £50bn a year we lose in tax revenues so that rich people get wealthier in retirement is regressive. We need to move to a system that is progressive and I don’t think that Ros’s first two/three proposals do this in a meaningful way. They will simply be a charter to employee benefit specialists to circumvent the rules.

The fundamental reform that I favour (and Ros does not) is as firm as the blockchain. TEE is black and white. The means of dealing with the cashflow implications of transition from EET can be dealt with contribution taxation using the scheme pays methodology.  All that is missing is the sharp intake of breath that is needed when a Government really goes for it.

This Government is in a better position than any other this century to make these changes . I have no voice like Ros Altmann’s , so I will ask her to join this debate with me. Ros , you are very welcome to my platform, please feel free to tell me why I’m wrong!


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Posted in advice gap, age wage, pensions, Retirement | Tagged , , , , , , | 2 Comments

And you may ask yourself – my God – what have I done?


Letting the days go by

If you listen to the news, you may be carrying a heavy load to work today. The US has just committed  what Europe considers a reckless assassination of the most popular person in Iran, bushfires rage in Australia and we’re rolling over our local issue -Brexit and our global issue – a sick planet,  into another year of grief.

But we are also working into something new and fresh. This is the first proper working day of the new decade, the day when most of us return to our offices wearing what we got for Christmas and a couple of pounds extra round the waste. It may not feel like we’ve had a holiday, but we are probably as fresh now as we’ll be all year! Fresh to kill it at work.

For those who observe the twelve days of Christmas, like us, the decorations are still up, working in the twenties is a novel experience. Many of us will be thinking back to their first working day of 2010,  has much really changed?

Water flowing underground

I hope that if you’re reading you can complete this sentence

I’m going to work because….

Whether it be to put food on the table or to save the planet, the purpose of your going to work is why you do it, and love doing it . And if you have no purpose – then you won’t enjoy your days this week.

I’ve thought a lot about my purpose over the past decade. While you spend most of your career building towards its fulfilment, I – like many of us – reached the top of my mountain and found there wasn’t a lot to see. I had the wrong goals. Rather than slink off into half-hearted retirement , cadging a few quid here and there with an inconsequential portfolio career, I did that full-on thing and started first Pension PlayPen and now AgeWage.

I no longer define success in terms of what I can do for myself (a good part of my career I was either self-employed or sole trader) or what I can do for my career. I have earned enough and saved enough to be independent and achieve something that I can look back on with a real sense of pride.

My reason for working in the twenties, a decade I never thought I’d be working in, is to deliver on those things that I thought I’d be doing when I started as a financial adviser early  in 1983. I thought then that i could use the privildge I had of a good university education and a stable upbringing to help people make better decisions with their money and that is what I’m doing, hopefully on a larger scale today.

Into the blue again?

If your reading this- thanks. I’m thinking of you, on your way into work, reading these words on a tiny screen on your phone, you may be asking yourself “what the hell am I doing with my life?”

If you can’t answer that question, I suggest you get off at the next station, cross the track and take the next train home.

But you won’t do that – because something inside you will remind you that there is a much worse alternative to going to work, and that is not going to work – on this day.

You can kick that question down the road, day after day, but until you answer it properly, you will be a slave to work.

After the money’s gone

This is the season when we will be assailed by recruitment companies looking to capitalise on our work insecurity. Many of us will be promised a new and happier life in a new job by people who really seem to care about your “wellness”.

Let me share with you, the benefit of being 58, you will not get better inside because you work for a new company, you will get better because you want to go to work because you know why you are going to work. And that does not mean you have to change jobs.

You may find your purpose and determine that you must change jobs to achieve it, but simply changing jobs to get a pay-rise or more holiday or a shorter commute is not going to change the big things.

Back in 1983, I was asking – “what do I want to do with my twenties?” , 37 years later I’m asking what do I want to do in the twenties and – weirdly it is the same thing. That at least tells me I have has some kind of focus in my life.

But when I look back – so much of that time could and should have been better spent.

Go on linked in – look at your CV and then ask yourself again – “why am I going to work in the twenties?”

Once in a Lifetime.

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