Lessons to learn from Dolphin Trust


18 months after its first program, Radio Four’s You and Yours program has produced a second program on Dolphin Trust (aka the German Property Group). You can listen to the second program here

As I’d followed up on the first report, I got asked to speak this time around. Sadly, the timings got mixed up so I’d only just started my carefully timed Spiegel when the program ended and I found myself talking on Facetime with no one listening!

I’d done the research and answered the program’s exam question “what lessons can we learn” from the debacle. The answer, in a simple phrase, is that if it looks too good to be true , it almost certainly is”. Dolphin looked and was too good to be true

Too plausible

Vorsprung durch technik and all that, Dolphin was a group of  German property company that had an all too perfect pitch, German companies don’t go wrong and this was based on the Grand Designs model – turning fabulous run down East German properties into desirable residences for the newly minted East German middle class.

Too much easy money

As if German property wasn’t exciting enough, the sauce was spiced with a healthy dose of German tax-payer’s money, lined up for anyone who wanted a “no-brainer” investment.

Too easy all round

Dolphin Trust was formed to provide two and five year bonds, with guaranteed exits and interest payable on terms that were at least four times what you could find on the high street. Investors could feel like savers, they were just smart enough to use the compelling combination of German Property with tax incentivized returns.

So why did this need to be sold at all?

The question that I asked in my last blog and ask in this, is why what seemed like a no-brainer needed to be sold with introductory fees of 20% or more? Surely this could sell itself with the developers taking their slice. What was wrong with German banks – why were the developers seeking crowd-funding in Singapore, Britain and other property mad countries.

The answer is that the developers did not want to develop, even when they got the builders in, they didn’t pay them. According to the joint investigation by the BBC and its German counterpart, what little building work that was commissioned wasn’t paid for.

In July 2020, German Property Group began filing for bankruptcy in Germany. It is estimated to owe at least £1bn to investors worldwide and at least £378m is thought to have been invested by people in the UK.

You can read the sad tales of those who lost out on the BBC website or listen to them on BBC Sounds but you may by now be weary of these stories, for the template is always the same and lessons are not being learned.

What lesson needs to be learned?

The lesson is in the returns you are actually getting on your pension savings. If you ask most people what a reasonable long-term return should be , you will probably get a default of 8-10%. Those numbers are hard-coded into our imagination. They were the numbers we learned from the 1980s and 1990s for that is when most people who Dolphin targeted were first saving into pensions, or PEPs or (later) ISAs.

But the actual returns most people have been getting since inflation was turned off at the turn of the millenium has been much lower. The average pension default fund has been returning around 3.5% pa since 2000 after all charges. Some have done  better

Some have done worse

The first data set shows returns from 2004 (where on average people have been getting 3.29% and the latter from 1997 (where on average people have been getting 5.91%.

Returns since 2010 have been comparable, despite our being in a bull market for shares and bonds, people have struggled to achieve an average net return of more than 5% in almost any of the large data sets we have analyzed.

The reality is that generally available 8-10% returns on 2 or 5 year bonds, live only in the imagination and the returns offered on Dolphin Trust bonds are – to those who study the facts – unimaginable.

There is a simple lesson to be learned from Dolphin Trust. When organizations are offering returns above the market rate, even with tax advantages, there is risk involved and if you can’t identify the risk, the risk is you are being scammed.


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The four green leaves of the clover

It’s my privilege to attend the three-weekly sessions of the Pensions NetWork and I’ve found them a welcome relief over this year of lockdown from the trials of the diurnal round. The 80 minute sessions are positive, informative and intellectually creative. Last night’s was no exception which reminds me to include the link to TPNW’s website from where you can apply to attend the sessions yourself. The next session is on December 17th and will be, like last night’s interactive with a number of panelists chaired by the avuncular John Moret, Pension’s answer to Bruce Forsyth.

The Pensions Network

The four green leaves of the clover

The success of last night’s session was in bringing together four distinct and complimentary approaches to responsible investment.

Tomas Carruthers, a risk-taker who has put his money where his mouth is since being a student, to improve transparency and value for the private investor.

Maria Nazarova-Doyle, a force of nature who flattens cynicism that insurance companies see ESG as “extra sales guaranteed” with the weight of her conviction.

Jonathan Parker, a consultant with a keen understanding of how to influence fiduciary decisions for good.

Tony Burdon, the mild campaigner with a tenacious focus on making our money matter.

Green for Go

I cannot report in detail – what was said – nor do I need to, the value of the evening being in the combined impact of four short presentations and questions from the floor from an audience that included many who could have been on the panel.

The big picture from a big-hearted Tomas Carruthers

Tomas’ approach is to clear layers of intermediation and create a 21st century stock exchange that enables people to take direct stewardship of their financial assets.

He sees the big picture, the $210trillion in the global financial ecosystem and considered how this money could convert to hitting Paris goals by 2030 and 2050. His estimate was that it would need to convert at $1.5tr a year over the next ten years for our financial assets to be on track for 100% carbon neutrality by 2050. There is £6.2 trillion tied up in the UK pension system, which is as good a place to start as any. He gave us three general insights to underpin what was to come

  1. Transparent governance works
  2. Don’t treat people as fools
  3. Respect the power of technology

Greta Thunberg in her thirties

Maria Nazarova-Doyle started turning up at Pension PlayPen lunches maybe 10 years ago. She was new to pensions then , finding  her way  as a transition analyst at Capita. She is now running the investment proposition for Scottish Widows and her presentation showed what intelligence, dedication and emotional intelligence can do. It is not for nothing that I liken her to Greta Thunberg. It’s greatly to Scottish Widows credit that they have given the responsibility of transforming their investment proposition to someone who fits none of the characteristics of a senior manager role within an insurance company.

The power of influence

Jonathan Parker has moved from being a senior manager within an insurance company to consultancy in a mirror image of Maria’s recent career path. His strength is in his capacity to influence while Maria’s is in transforming the environment directly. Both approaches are needed if we are to hit our Paris goals with the wealth of the nation.

We have to accept that the fiduciaries who look after other people’s money are not going to adopt new investment beliefs because of the noise of the market. They are rightly skeptical about “green-washing” and struggle to see through the complexity of different approaches to ESG, the wood for the trees. Jonathan Parker put forward a compelling case for using clear analytics and patient explanation to influence those with their hands on the levers of change.

Leading the campaign

What the responsible investment movement has lacked so far is a focus for popular support. Make My Money Matter is that focus and Tony Burdon is the CEO though not the poster-boy! There needs to be a backroom to any front room , and while we all know Richard Curtis, Tony is less of a household name.

But he brought to last night the perfect conclusion, a mild-mannered passion that left us in no doubt that what the transformation of pensions means is a better place for us to live both in terms of our planet and in terms of our social goals and the way we govern ourselves. The popular campaign for change makes influencing those with the hands on the levers and transforming the financial institutions a whole lot easier. It makes the big picture laid out by Tomas- happen.

The Four Green leaves of a clover

Clover is good, it makes honey and four leaf clovers are especially good, they bring good luck and they are exceptionally green.

Last night felt good, I felt lucky, I felt exceptionally green and in such good company saw a way forwards to the green goals we have set ourselves.

Further Zooming…

Learning about how financial services (and pensions in particular) are adapting to the challenge of a burning planet is an education devoutly to be wished for. I am looking forward to attending another such panel session hosted by Chatham House’s Hoffman Institute. , the IFOA and FiNSTIC We are fortunate to be able to get this education online and with minimum logistical difficulty, this will not always be the case, I urge you to  access to such learning , while we can.

Thanks to the actuaries for transformational change for bringing this to my attention.


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Are the excess deaths in 2020 just a ‘shortfall’ from 2019

By Richard Marshall

COVID-19 Actuaries Response Group – Learn. Share. Educate. Influence.


It has been suggested that the severity of COVID-19 in the UK is partly due to the low mortality in 2019, when we experienced a “shortfall” in excess winter deaths. In this bulletin, we consider:

·      The extent to which excess deaths in 2020 depends on the period used as a benchmark.

·      How the excess deaths in 2020 might have looked lighter if winter mortality in 2018/19 had been in line with the 2015-18 average.

·      A comparison with similar excess deaths measures from Germany and Sweden.

We find that the number of excess deaths in 2020 is materially higher than can be explained by either a reasonable change in benchmark or the effect of low mortality during the winter of 2018/19.

The high number of excess deaths in the UK is a genuine feature, not simply a consequence of low winter deaths in 2018/19.

Choice of benchmark

Using weekly death registration data from 1 January 2015 to 31 December 2019, the number of daily deaths for the UK was calculated. Two benchmarks for weekly mortality were generated:

  • Deaths in 2019 only
  • Average number of deaths in the same weeks across the years 2015 to 2019.

The deaths in 2020 were compared to each benchmark (adjusting for incomplete weeks) on a weekly and a cumulative basis. The results are shown in Figures 1 and 2.

Figure 1: Weekly excess deaths in 2020

Figure 2: Cumulative excess deaths in 2020

The difference in the excess mortality between the two benchmarks (to 7 August) is approximately 9,100 deaths (excess is 65,250 relative to 2019 and 56,150 relative to 2015-19). The difference is not evenly distributed through the year; almost all of it (8,600 deaths) relates to the winter period (January to March).

Neither benchmark has been adjusted for population ageing or mortality improvements. These should broadly offset each other and their effect on the estimate of excess mortality would be immaterial.

Had mortality in 2019 been in line with the 2015-18 average (without change to the deaths in 2020), the excess deaths would have been 53,850.  That is 11,400 fewer than the comparison to 2019 (a reduction of 17%) and 2,300 fewer than the comparison to 2015-19 (a reduction of 4%).

Potential excess COVID-19 deaths amongst ‘influenza non-deaths’ from 2019

There is the possibility that some of the excess deaths (including COVID-19 deaths) amongst the frail elderly during the period since March 2020 are individuals who might have been expected to die during 2019, if winter mortality had not been relatively light at that time.

To investigate this, it is useful to re-group months so that they are organised into three periods, a central ‘Winter’ period which runs from December to March, along with periods either side of this: ‘Pre-winter’ from August to November and ‘Post-winter’ from April to July.

In this section, the year from 1 August to 31 July is referred to by the two calendar years which intersect it. So 2015/16 refers to the year from 1 August 2015 to 31 July 2016.

Using the same data as in the previous section, the ‘Excess Winter Deaths’ for 2015/16 to 2019/20, have been calculated as follows:

Excess Winter Deaths = Winter deaths – ½ (Pre-winter deaths + Post-winter deaths)

For 2019/20 only pre-winter deaths can be used (the margin of error is small as the difference between pre-winter deaths and post-winter deaths is typically small).

Excess winter deaths have been calculated net of approximately 5,500 deaths due to COVID-19 registered up until the end of March 2020.

Table 1: Excess Winter Deaths in the UK, 2015/16 to 2019/20

Winter Average pre or post winter deaths Excess Winter Deaths
2015/16 190,200 22,400
2016/17 189,400 35,500
2017/18 192,400 48,100
2018/19 188,800 25,200
2019/20 195,200 25,600


Relative to the average of the previous three winters (35,333 excess deaths), both the 2018/19 and 2019/20 excess winter deaths appear light.

It is worth noting that following the light winter in 2018/19, pre-winter mortality for 2019/20 was higher than average, reducing the number of survivors exposed to COVID-19 from March 2020. The average number of deaths in a pre- or post-winter period in 2015/16 to 2018/19, was 190,200. There were 195,200 pre-winter deaths in 2019/20, an excess of 5,000.

A crude (and probably prudent[1]) estimate of the number of additional lives exposed to risk of death in 2020 could be the sum of the shortfalls of excess winter deaths in 2018/19 and the first quarter of the winter 2019/20 season (relative to the prior 3-year average), less the excess pre-winter deaths for the 2019/20 season (the 5,000 deaths referred to in the previous paragraph). This comes to:

In this calculation, the winter deaths from January to March 2020 have been excluded, as they already contribute to the 2020 cumulative excess deaths.

So, there are perhaps 7,550 additional (potentially higher-risk) individuals at risk of death in 2020 as a result of surviving the prior winters. The light winter mortality in 2019/20 (prior to COVID-19) may have increased the population at risk of COVID-19 further still, but as noted above this would have no net effect on the excess deaths in 2020.

As noted, this is likely to be a high estimate and not all of these will necessarily have died during 2020.

Even if it were the case that the whole of this ‘excess survivor’ population had died during 2020, this would explain no more than 15% of the total excess deaths (based on the 5-year average benchmark).

We therefore conclude that the excess mortality in 2020 cannot be explained by excess deaths amongst those who might have been expected to die during the winter of 2018/19 or December 2019 (had those periods seen excess deaths in line with the prior three winters).


Comparison to Germany and Sweden

Table 2 shows the total number of deaths in Germany for January to July (inclusive) in each year from 2015 to 2020, and also for the full calendar years from 2015 to 2019[2].

Table 2: German death statistics

Year Total deaths (Jan – July) Total deaths (Jan – Dec)
2015  562,763  925,200
2016  533,177  910,899
2017  559,558  932,263
2018  576,996  954,874
2019  556,341  939,520
2020  557,337

Based on these figures, the excess deaths versus the same two benchmarks (2019, and the 2015-2019 average) would be 1,000 and minus 450 respectively. The choice of benchmark makes relatively little difference. It is noteworthy that deaths for 2019 were higher than the average over 2015 to 2018 by approximately 8,700. Had all of these excess deaths been delayed from 2019 to 2020, then the excess mortality in 2020 to date (versus 2019) would have been approximately 18,400.

The SCB (Statistics Sweden) has published daily death registration data for 2015 to 2020[3]. Table 3 shows total deaths from January to July and over the full calendar year from 2015 to 2019.

Table 3: Swedish death statistics

Year Total deaths (Jan – July) Total deaths (Jan – Dec)
2015  54,131  89,947
2016  52,252  89,019
2017  53,383  89,742
2018  54,090  89,672
2019  50,371  86,150
2020  57,002

Based on these figures, the excess deaths versus the same two benchmarks (2019, and the 2015-2019 average) would be 6,650 and 4,150 respectively.

Swedish full-year deaths in 2019 were approximately 3,450 fewer than the average of the previous four years; this is similar to the UK’s light mortality in 2019. Had these additional deaths occurred in 2019 and the equivalent number been removed from 2020, there would be roughly minus 250 excess deaths in Sweden for 2020 (up until 31 July).

Table 4 summarises the comparison between Germany, Sweden and the UK.

Table 4: Comparison of excess deaths in Germany, Sweden and the UK

  Germany Sweden UK
January – July (to 7 August in the UK)
§  2020 Excess (relative to 2019) 1,000 6,650 65,250
§  2020 Excess (relative to 2015-19 average) (450) 4,150 56,150
§  2020 Excess (relative to 2015-18 average) (800) 3,550 53,850
Total annual deaths / Winter Excess Deaths
§  2019 Excess (relative to 2015-18 average)

[Winter deaths adjustment for the UK]

8,700 (3,450) (7,550)
§  Adjustment to 2020 deaths 8,700 (3,450) (7,550)
§  Adjustment to 2019 deaths (8,700) 3,450 7,550
Adjusted excess deaths during the period: January – July (to 7 August in the UK)
§  2020 Excess (relative to 2019) after adjusting for light/heavy mortality in 2019. 18,400 (250) 50,050
§  As a proportion of average deaths over 2015-18 2.0% -0.3% 8.3%
§  2020 Excess (relative to 2015-18) after adjusting for light/heavy mortality in 2019. 7,900 100 46,250
§  As a proportion of average deaths over 2015-18 0.9% 0.1% 7.6%


So, even after adjustment in a consistent manner to the UK, excess deaths (as a proportion of the average annual deaths over 2015-18) in Germany and Sweden have been significantly lighter than in the UK.


We have shown that the excess deaths in 2020 can be measured relative to different benchmarks and that this can result in a difference of around 9,100 deaths.

Had 2019 experienced heavier mortality (in line with the recent average) then the excess deaths in 2020 might have been further reduced to 53,850.

In addition, ‘excess survivors’ from the previous low-mortality winters might have contributed some additional deaths in 2020. However, an upper bound on these might reasonably be set at 7,550 deaths. This leaves at least 46,250 excess deaths even against the 2015-18 average.

Whilst the calculations set out here have been approximate, they show it is improbable that more than 15% of the UK’s excess deaths can be explained by the low-mortality winter. Given the prudent assumptions required to get close to 15%, it seems likely that the true proportion is much lower.

Comparing the UK excess deaths with Germany and Sweden, adjusted in a similar manner, shows that the excess deaths in the UK are materially higher and the difference in the total excess mortality between the UK and these countries is, at most, only partly explained by differences in winter mortality.

25 November 2020 (based on information available to end October)

[1] This assessment is based on the particularly severe mortality seen in 2018 being included within a relatively short period of averaging.

[2] https://www.destatis.de/EN/Themes/Society-Environment/Population/Deaths-Life-Expectancy/_node.html

[3] https://www.scb.se/contentassets/edc2b33f85ad415d8e7909002253ed84/2020-10-05-preliminar_statistik_over_doda_inkl_eng.xlsx

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Five ways the change from RPI may impact you and your pension


It doesn’t matter if you are an employer or a DB pensioner or a DC saver, the Government’s decision to move from RPI to CPIH in 2030 will almost certainly impact you. The winners in this will be the Treasury, and in as much as the Treasury gets its money from tax , the tax-payer. The move to CPIH relieves the Treasury of obligations to pay out on RPI linked gilts (linkers) after 2030 and that will feed through to a happier Treasury and sadder pensioners.

But how will all this evidence itself to the likes of me and you?

  1. Some pensions will be smaller than expected from 2030. CPIH typically is lower by 1% pa than RPI so this is like getting a lifetime paycut of 1% pa. That will typically add up to around £8,000 per person less – from their pension.
  2. This will no doubt be reflected in transfer values which will reflect lower future liabilities and so will be smaller.
  3. If you are in a DC pension and in the lifestyle stage (typically within 10 years of when the scheme expects you to retire) you may well be invested in an annuity protection fund which will be invested in linkers, the value of your linkers will fall, if they are expected to pay RPI after 2030 (that’s because they won’t)
  4. If you are an employer who has been investing in linkers to protect yourself against your RPI liabilities, you are going to find that a large amount of the price you paid is wasted, you won’t get the RPI linkage, you’ll get 1% pa less, meaning that you’ve overpaid for your insurance.
  5. Whether you are an employer, or a pensioner or a DC saver, who is expected to be out of pocket over this, tough. You’ve been mis-sold gilts as RPI linkers if their duration is beyond 2030 and that’s all there is to it.

On top of all this of course are changes to the way prices go up and they are likely to continue to rise as they always have. You will simply lose some ability to keep on top of price inflation.

A lot of angry people…

People who buy gilts expect to be buying into a risk-free security. But the linker isn’t risk free, it can mutate from RPI to CPIH at the swish of Rushi Sunak’s pen. This risk is not made clear to people who are buying linkers – either by Government or by intermediaries like the firms setting up “de-risking strategies” – the consultants and asset managers selling Liability Driven Investment (LDI).  Already Insight investment management has been protesting about what has happened , presumably on behalf of their clients. Their clients may be angry at more than Government.

I am a pensioner and I will take a haircut on my pension in my 70s , 80s , 90s and hopefully beyond (I’m not doing all this keep-fit for nothing). I am pretty cross as I had been banking on my gold plated increases and now discover I’m getting chrome instead. Not much sympathy for me perhaps, but the real price of this downgrade in indexation will be paid by people who have pensions due to them.

Are we right to be angry?

Well this change has been well flagged, it has been consulted on and frankly this is not the worst option presented to us (we could have lost RPI linkage in 2025). The Government can move the goalposts on these things as they like and this is a well-defined “political” risk.

What is more worrying is that the strategies that have been pursued by Government departments and agencies, most notably DWP and tPR have been to promote the lockdown of liabilities by matching them with assets. This means buying linkers at inflated prices because of another Government policy (QE) and now finding that those prices were doubly inflated as the things purchased don’t do what they say on the packet.

People have every right to be angry if they find themselves in these duff gilts through no choice of their own and I expect trustees promoting default funds stuffed full of linkers for those in the final years of lifestyle will have a bit of explaining to do.

But in the end , Government can and will  do what it wants. You may think this is a God -damned shame – but you voted them in.

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DCIF; we won’t pay higher fees without sight of better value

On  Ricki Sushak’s “day of reckoning” , the DCIF unveiled a 75 page report from Richard Parkin on progress made by DC master trusts in adopting best investment practice. The agenda of the report is clearly focused on DC as a means to accumulate wealth and is open to the criticism that for investment managers, this is a self-serving agenda.

We could have had the hour dealing with member concerns including

  1. What to do about the build up of small pots
  2. How to manage contributions to get promised tax incentives
  3. When and where to see my pension rights in one place
  4. How best to spend my pension savings

I was surprised (and disappointed) that my question , posed prior to the meeting and during the meeting, as to the impact of the Pension Schemes Bill’s CDC provisions on investment thinking, went unasked. I was pleased that Graham Peacock’s cheeky question as to whether ESG stood for “Enhanced Sales Guaranteed” was asked.

While I am broadly in support of the promotion of the value enhancement of good investment practice in DC, I am not blind to the competing agenda of fund managers and platform providers. The debate is about fees and value – value for money.

Fund manager v platform provider

What the report boils down to is five proposals

  1. Government doesn’t seek to reduce the charge cap below its
    current level or seek to include transaction costs within the
    cap. Doing so is unlikely to improve competition and will only
    constrain investment development further
  2. Master trusts and other DC schemes should be required to
    separately disclose what is spent on investment versus other
    services to allow users to better assess value and facilitate
    a more informed discussion about what drives improved
    member outcomes
  3.  Industry and government must continue to work together to
    develop new approaches to enabling master trusts to access
    illiquid investments efficiently and affordably, particularly in the
    area of socially responsible investment
  4.  DWP and the Pensions Regulator need to clarify their
    requirements for occupational schemes in relation to retirement
    pathways and associated communication to enable master
    trusts and asset managers to continue to innovate in this
    important area
  5. More asset managers should look to design funds and
    capability specifically for the DC market, in response to some
    of the feedback which has been highlighted in this report.

It seems clear to me that Government has no intention on constraining the use of illiquids within DC, indeed it is doing all it can to loosen the charge cap to ensure that more schemes follow Nest into the kind of patient capital investment that makes our money matter in terms of building back Britain (that’s enough woke sycophancy-Ed)

The second point is one made by this blog many times over the years. Richard Parkin , when presenting the report , mentioned how shocked he was when he found out the low proportion of master trust revenues committed to paying for investment management. At a time when fund managers are offering “free” fund management, in return for rights to stock-lend, it is hardly surprising that commercial master trusts are maximising retained revenues and freezing out expensive managers. Unsurprising but not necessarily desirable. What is needed from master trusts is what is being required by the FCA. Employers and members need “value assessments” of the fund management and its impact on member outcomes, these assessments should focus on what value is being achieved for the money that platforms are paying for funds. The member is wrongly thinking that their AMC represents the cost of investment and such value assessments would put them right.

I agree with point three, the current mechanisms for delivering illiquids to DC aren’t yet fit for purpose, it is up to the investment management industry to work out how to create SPVs that work for DC, it is not up to master trusts to adopt the current “investment solutions” to satisfy the needs of fund managers and desires of Government.

On the fourth point, I sense that no-one in TPR or DWP is so impressed with the investment pathways being developed by the FCA, to follow them down that rabbit hole. AgeWage recently analysed 45,000 personal pension pots within workplace pensions for a leading IGC, only 31 pots were paying adviser charging, meaning that 99.99% of pots were unadvised. To suppose that investment pathways can do the heavy lifting for master trusts without considerable support from advice or guidance is a big assumption. What seems much more likely is that the DWP is lining up scheme pensions , paid from CDC as the long-term solution to the clumsily named “decumulation” problem.

The final point is fair and is born out by my conversations with many fund managers who are baffled about how they can provide fund management for free and expect to make a profit. The report acknowledges that the investment industry and the platform providers are not always speaking the same language.

But the way for investment managers to engage with master trusts is not to tell them what they should be doing but to find ways for master trusts to do things better and that means focusing on member outcomes. Only once in the hour long presentation yesterday did I hear anyone talking from the member’s point of view (thank you Darren Agomber). Members carry the risks of higher charges not delivering better outcomes and it is only if investment managers can convince trustees (the member’s representatives) that their strategies deliver more for less, that strategies will change.

For this to happen , we will need to see clear evidence that new strategies work. Thus far, I have seen little from the data that shows that investment in more sophisticated strategies  provides greater returns, though there is some evidence that larger schemes that can adopt diversification offer more stable defaults

schemes to the right of the red (£100m assets) line showing a wider range of outcomes than the larger schemes to the left.

Special pleading from the funds industry?

I recognise, though I can’t sympathise , with the plight of most asset managers with regards DC investment. The DCIF produced a word cloud during the meeting where participants were asked to say in a word what their greatest challenges were , getting traction with master trusts. I have marked my suggestions in yellow – so please exclude them.

I cannot sympathise with the fund manager’s angst about fees because I cannot yet see any argument for master trusts paying more for fund management based on achieved value.

This analysis is useful in showing us which master trusts are diversifying

But there is no comparable slide to show which master trusts are delivering excess value for the designs they have adopted. Instead we are asked to consider compaative returns in a way that speaks to the fund industry but not to members or their representatives.

Indeed, the analysis within the report, interesting as it is for fund managers, is really geared around understanding the marketing opportunity.

In talking with providers, the DCIF have however landed on one key finding. Providers want to be judged on value and are actually judged on cost. Here there seems consensus between platform providers and fund managers.

So is the solution to our problems , to allow costs to increase to a point that value can shine through? This seems a self-serving argument that no employer choosing a master trust will sign up to. What is needed is clear evidence that where platform providers invest a high proportion of their limited revenues in fund management , they get a bang for the member’s buck.

But without charts demonstrating where this is happening, I can see no reason for employers choosing master trusts to look beyond fees as a differentiator. The ball is in the court of the fund managers to show how member outcomes are improved by adopting their value strategies and it’s for the master trusts themselves to show themselves accountable for the decisions they are taking in the employment of fund managers.


Yesterday we became aware of the cost of the pandemic and the Treasury took on responsibility for the repayment of the debt we have accumulated in 2020.

The day of reckoning had been foretold to be November 25th. But for DC members, the day of reckoning may be 30 years away and we cannot afford to wait till 2050 to tell members we got it wrong back in 2020.

Trustees will not be around to be accountable for today’s decisions and so we need to be sure of the basis on which those decisions are taken – right now. The debate the DCIF are instigating is the right debate, their problem is they are having it with themselves.

The pushback in this blog, was not happening on the call, but it is the dynamic of the real debate. We need a lot more evidence than could be supplied yesterday, before that debate is over. Right now, there is no accountability for decisions taken – nor will there be – till we have clearer evidence of the outcomes of the choices. We need better data and a clearer understanding of the consequences of the options facing master trustees.

The report is available here

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Simon Baynes – a great loss to pensions and to all who knew him

Simon Baynes


We learned yesterday of the death of Simon Baynes, a pension trustee who was known, respected and liked by everyone I know. For a sense of the breadth of service Simon gave to pensions, the church and his community, this – his election address for the General Synod in 2015, is a good point to start.

You can see some tributes on his CCTl colleague, Susan Anyan’s appreciation to him.

I was particularly  touched by Lynda Whitney’s quotation from the final chapter of Simon’s autobiography

It is incumbent on us neither through negligence nor folly to squander our inheritance but to pass it on to our successors enriched by our own generosity and service.

I wasn’t aware that Simon had suffered with diabetes for 55 years , nor that he had won the Joslin medal for fortitude and I am now looking forward to reading this book which can be purchased here.

We now have signed copies of Simon Baynes’ incredible autobiography ‘Extreme Survivor’.

This book tells Simon’s…

Posted by Books on the Hill St Albans on Thursday, 23 July 2020

I got to know Simon through work, I had a wonderful meeting with him at his club, the Athenaeum, which he seemed very much at home in. We spoke about his work for Logica (then one of Britain’s largest DC trusts and of his plans to become a professional trustee and we spoke of his work for the General Synod of the Church of England.

Each December after that meeting I received a Christmas card from Simon, though I had done nothing to deserve it.  He worked with our consultancy and with many others, all who worked with him would praise him and when he joined Capital Cranfield, he became one of their most popular members. Neil McPherson’s moving tribute to Simon is on the CCTl website and can be accessed here.

He was taken too soon, his stoical acceptance of the illness that killed him and his lifelong affliction with diabetes are marks of his selflessness and encouragement to all those for whom the prospect of such things is too awful to consider.

I hope that his memory will survive him in his book , through his work and most of all through his kind and Christian spirit which is an example to us.

If you would like to mark your respect with a donation, Neil McPherson has posted this link and comment to the linked in thread from which I have already quoted.

It is very moving to see such heartfelt comments from all Simon’s friends. I’ve detailed below information on the charity chosen by Simon’s wife Clare if anyone wishes to make a donation in his memory.

“Rennie Grove Hospice have been absolutely wonderful over the last few months in helping us look after Simon and keep him at home.  There is huge strain on their finances due to Covid-19 as fundraising events have been affected and their services have been being used more than ever because everyone is wanting to stay at home, not risk being in hospital or even an inpatient in our local hospice, due to the virus. ”  


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“Sooner being better than perfect” a model for our times.

There’s a tremendous  post on social media from Tan Suee Chieh , president of the IFOA which outlines the principles that enabled Louis Gerstner to transform IBM.

Gerstner Principles

• Manage by principle, not process
• Market driven (or membership driven)
• Look for people who solve problems, not hide behind the staff, sack the politicians
• Reduce hierarchy and committees: create new leadership teams
• Lead change from the top
• Thinking and acting with urgency
• Accountability must replace looking good
• Set priorities, with sooner being better than perfect

The approach has been adopted by COVID-19 actuaries right down to the distribution of their expert content through this blog. I have to admit that some of my posting may not have been perfect, but the posting has always been quick!

The COVID-19 Actuarial Response Group’s capacity to get information onto people’s browsers in digestible format and in real time is a model for us all, and especially for those driving the stately coach – the pensions dashboard.

The pension dashboard is making stately progress

Sooner better than perfect

Perhaps the Pension Dashboard Program could adopt the Gerstner Principles so as to speed up the delivery of sorely needed information to people looking to see their pension rights in one place.

The current debate over the Dashboard Available Point seems skewed towards perfect and away from “sooner”, but this risks the dashboard delivering so late as to be obsolete before it arrives. The process of getting there seems to have overtaken the principles that have inspired so many over the past five years to give freely of their time to make this project happen.

The dispersed governance structures put in place at the outset of the project have meant that the dashboard is being driven by committees not from the top. The need for consensus has meant for painfully slow process on simple matters such as the data templates that have pre-occupied the PDP for most of 2020 and meant another year has slipped by with little tangible process.

Though no one doubts that Chris Curry is doing an admirable job, he is steering the dashboard project in addition to running the PPI and participating in numerous other projects. The dashboard has therefore got limited leadership and this has led to long periods of the year where it seems nothing is happening.

And far from being sacked, the politicians have had a heyday with the dashboard. The debates over private v public dashboards, the hand-wringing over potential security issues and the seeming incapacity to get the “grunt” done till we have mandation through the creation of a Pension Schemes Act, is leading to slower decision making and a dilution of accountability. Who is driving the pace of the dashboard transformation, perhaps not who but what – COVID-19 seems to its pacemaker.

Set priorities!

Of course there are risks in delivering any great project, I am sure there were many within IBM who considered the pace of change introduced by Gerstner (discussed in his great book ‘Who Says Elephants can Dance?”) in the way that many commentators look at Fintechs such as Pension Bee.

I was on a call yesterday with several such Fintechs and the frustration with the delivery of Open Pensions as part of the Open Finance Initiative was tangible. The leadership that is being shown by those wanting to give people access to their data in digestible format was in stark contrast to the attitudes we see from many on the supply side of that data who are not “thinking or acting with urgency”, who are hiding behind staff and failing to set priorities so we see action sooner.

There needs to be a reset at the PDP which allows it to adopt the Gerstner principles and free itself from the hierarchies of decision making that are hampering its progress. The Competition and Markets Authority’s approach to cutting the Gordian knot that was preventing open banking is precisely what is needed now. We need the spirit and principles of Gerstner , not the creation of more bureaucracy.

Now is the time to be fast not thoughtful, we have thought for five years, now we should prioritize the rapidity of execution.

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“Something in the air” – aerosol transmission explored by C19-arg.

Aerosol Transmission           

By Nicola Oliver and Beate Degan

COVID-19 Actuaries Response Group – Learn. Share. Educate. Influence.                                                                        http://www.covid-arg.com


In September, a group of academics published an extensive overview on the risks associated with aerosol transmission. In the form of an evidence-based FAQ, the document is more than 60 pages long. (link).

The authors state that:

‘The goal of these FAQs is to provide information to the general public in an efficient manner about how to prevent aerosol transmission of COVID-19, with the hope that this will allow more informed decision making by individuals or organizations.’

In this bulletin, we pull together the key points in an easily digestible format. We are indebted to the authors of the document for this detailed analysis.

How is the virus transmitted?

There are 3 routes for transmission of the virus that causes COVID-19.

  1. Touching virus-contaminated surfaces which includes door handles and other people’s hands. This is known as the “fomite” path.
  2. Receiving the virus via another person’s “large droplet” emissions which are mainly generated when coughing, sneezing, and sometimes talking. Below, these are the blue “ballistic” droplets which are relatively large and heavy and fall to the ground quickly.
  3. “Aerosols” are small, are emitted from the respiratory tract, travel far and can linger in the air for hours (green, yellow and red dots below) and are exhaled when talking, singing, coughing, sneezing, and breathing.


Recent evidence suggests that the aerosol route of transmission plays a larger role than previously thought. Historic bias had prevented more careful consideration of this route of transmission, but on 5 October 2020, the CDC acknowledged that “the coronavirus can be spread through airborne particles that can linger in the air “for minutes or even hours” — even among people who are more than 6 feet apart” (link).


How do aerosols behave?

Given aerosols play an important role in transmission of COVID-19, it is not only important to maintain a rigid hygiene routine (washing hands etc.), but also to ensure you are careful regarding the air you are breathing, since aerosols dilute over time in ambient environments.

Here we can see time for particles of different sizes to settle to the ground in still air, from the height of a person.

The real boundary between ballistic droplets and aerosols is ~ 100 μm and as you can see, ballistic droplets settle much faster as they are heavier, and that very small aerosols remain airborne for hours. Evidence suggests that the SARS-CoV-2 remain infectious in aerosols for about 1-2 hours in an indoor environment.

While an individual SARS-CoV-2 virus is very small (120 nm or 0.12 microns), the aerosols in which they exist are larger, probably around a few microns (corresponding to the third of the five examples above). The viruses comprise a very small fraction of the aerosol.

Protecting ourselves from aerosol transmission

To reduce risk, avoid:

  • Crowded spaces
  • Close proximity to others
  • Low ventilation environments
  • Long durations
  • Places where people are not wearing masks

The risk of transmission in different settings is displayed here. Outdoors is clearly safer than indoors, but it is still not 100% safe.

If a porous obstacle is put in the path of air that contains aerosols, some of the aerosols will end up in the obstacle – the basic physics of why we should wear a mask.

A mask should fit closely to the face, over the mouth and nose, whether clear, medical, or cloth, with universal masking providing maximum protection and least exposure.

There are many errors and misconceptions on masks, the fact is, like wearing a coat to keep you warm by preventing heat loss, wearing a mask prevents aerosol and droplet release. Vaping aerosols do not pass thorugh masks. Face shields and plexiglass are good for blocking wearer released ballistic droplets, and should be considered as an adjunct to wearing a mask.

Considerations for everyday life

Situation Practical Steps
Restaurant Safer to eat outdoors

Wear a mask when not actually eating, drinking or interacting with a (masked) server

2 metre gap between tables which should only be shared with those in your ‘bubble’

Swimming pool, park or beach Avoid crowds, maintain distance, and use masks if indicated
Taxi Wear a mask (driver & passenger)

Open two windows

Set ventilation system to outdoor air

Plane Wear a mask

Avoid talking

Airlines recommended to leave the middle row empty

Schools Schools should only operate in person if the levels of infection in the community are low

Increase ventilation, wear masks, maintain distance, reduce density, reduce volume of speech

Operate outdoors wherever possible

Dentists Dentists to implement localized extraction of aerosols
Elevators Wear a mask

Maximum of 4 people per ‘ride’

No speaking, no touching of wall surfaces, touch floor buttons with a disposable tissue



As mentioned in the table, ventilation is important to control aerosols. Ventilation basically means diluting indoor air with outdoor air, and opening windows is the most basic method you can use. The rate of ventilation is calculated in air changes per hour, (ACH) which varies across different buildings.

A second measure is liters/second/person (L/s/p), which takes into account the number of people present, and is the most relevant parameter for preventing aerosol transmission of disease.

Estimating the ventilation rate can be done through measuring the decay rate of carbon dioxide (CO2). Relatively cheap meters are available to do this.

C02 levels as a proxy for ventilation quality

Measuring C02 levels can give a good indication of the amount of exhaled air in a space and thus the quality of the ventilation. Keeping windows continuously open allows for continuously-exhaled virus to be constantly diluted and expelled outdoors, and not allowed to accumulate indoors.

Outdoor CO2 is about 400ppm, human exaled breath is about 40,000 ppm CO2. There are a number of caveats to consider, but broadly speaking:

  • 400-500 ppm – the ventilation is very good
  • 800 ppm – 1% of the air you are breathing has already been breathed by someone in the space – considered risky.
  • 4400 ppm – 10% of the air you are breathing has already been breathed by someone else – considered dangerous

This doesn’t tell exactly how many aerosols containing COVID-19 are in a room, since this depends on multiple factors (i.e. how many people are in the room, how many people with a COVID-19 infection), but it gives a good indicator.

So-called NDIR (non-dispersive infrared) CO2 analyzers are recommended by the authors, with a price range between 100-200 USD. They can be a useful tool, especially in class rooms and alike, to help monitor ventilation, particularly in the upcoming winter period in the Northern hemisphere.

Do air filters work?

Virus exposure risk is a function of aerosol concentration and time; thus, when it is not possible to reduce our time exposure, it is recommended to reduce the concentration. This can be achieved through the use of portable air filters that are designed to remove virus relevant aerosol sizes.

High efficiency particulate air filter (HEPA) air cleaners are the best type of air cleaners and can remove more than 99.9% of aerosols in an air stream passing through them. It is important to follow manufacturer guidelines for frequency of filter replacement.

What about germicidal ultraviolet light (gUV)?

Ultraviolet (UV) germicidal air disinfection is an engineering method used to control the airborne transmission of pathogenic microorganisms in high-risk settings. Indeed, upper-room gUV was used in classrooms to combat measles and to tackle the resurgence of tuberculosis in the late 1990s. Currently, this technology is costly and is being used in some healthcare settings only.

Other points

  • Portable air cleaners that are not based on filtration are not recommended
  • Spraying disinfectant into the air does not remove the virus
  • Humidity and temperature only matter for transmission at a distance; the biggest impact comes from increasing ventilation and air filtration

Conclusion – and a civic duty?

In conclusion, to protect yourself from aerosol transmission, avoid:

  • Crowded spaces
  • Close proximity to others
  • Low ventilation environments
  • Long durations
  • Places where people are not wearing masks
  • Talking, and especially loud talking / shouting / singing
  • High breathing rates (e.g., indoor aerobic exercise)

These points can be represented by the mnemonic A CIVIC DUTY, per the following graphic:



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Tomorrow is a day of reckoning -DIES IRAE

Wednesday will be a day or reckoning – DIES IRAE, DIES ILLA, that day is a day of wrath. We have paid a high price for less productivity and less enjoyment. If there is such a thing as a lose-lose, the pandemic is it for there is no economic silver lining, unless you consider the Oxford vaccine a game-changer for our economy – which is optimistic in extreme.

SOLVET SAECLUM IN FACILLA, the earth is in ashes. For the second time this century, the prospect of progress has receded and we are shaping up for a second sharp intake of breath as we contemplate who will pay not just for what has happened in 2020, but for the cost of vaccinating us in 2021.

The question is both how we’ll pay and who will pay. Following the financial crisis (the first sharp intake of breath) it became clear that those without money would pay more tax , get less services and receive no pay-rises. This was austerity. It was deeply divisive, not least because the finger of blame could be pointed at those who had created the crisis, for whom austerity was just a fancy word.

The pandemic has hit the poor hardest. The second wave is repeating the first, hitting those on low incomes, in cities and in poor health . But will the poor have to  pay the economic price of COVID as they paid the price for the breaking of the banks?

What of the future?

While Wednesday will be about spending and borrowing, at some point the chancellor will have to decide how it will be paid for. He will start to address this in next March’s Budget, although most economic commentators feel the economy will still be too fragile for major tax rises.

It is possible that, with the success of a Covid vaccine, the economy could bounce back, limiting the need for big rises. However, Paul Johnson expects that four or five years down the road he still expects the economy to be about 4%-5% smaller than before the pandemic.

Rein in spending and raise taxes too early, and recovery will be choked off. Leave it too late, and the public finances will spin out of control.

Who pays?

It is possible that the austerity program that was introduced in 2010 could be repeated ten years on, but both Sunak and Johnson have publicly stated this is not the way they will go.

If the price for the pandemic is not dumped on the poor, then it must be paid by the affluent and that will mean taxing us (and most readers of this blog are affluent) on our income and on our assets. Higher marginal rates of income tax, higher taxes on capital gains, lower reliefs on pensions and investments and a reduction in the privileges  of those who have the means to pay more . This may not sound very Conservative, but it is the price that will need to be paid for national unity. DIES IRAE

A fair price for us to pay.

I live in the City of London, we have some of the least infected postcodes in London. But I do not have to cycle more than five minutes to be in Lambeth, Southwark, Hackney or Islington where infection rates were amongst the highest in the country earlier this year.

I cycled through Dalston last night and it struck me how huge the gap is between the lives of those I talk with on business calls and the daily lives on the Roman Road. The street that I live on has a hostel for the homeless, it is full and those who cannot get in are in tents along the embankment. Wherever I go , to exercise, I see affluence and destitution living alongside each other.

So my message to Ricki Sunak, as he prepares for DIES IRAE tomorrow is in the great chant.

Or , to put a 21st century slant upon the subject, here is the inimitable Jonny Cash with what Springsteen called the  “Momentous – ‘The Man Comes Around’.”




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CPI, RPI and CPIH – get up to speed pension people!


I first published this blog in May 2017. Since then the Treasury has been consulting on the RPI/CPI/CPIH issues identified by the Royal Statistical Society. The result of that consultation is due anytime (most likely Wednesday 25th November). The impact of the decision on where to go with pension indexation will have profound implications not just for the amount of pension received by those in defined benefit schemes but for the employers who sponsor them and bear the balance of any extra costs arising.

This might be a good time to review the “seriously excellent” article that got the Higher Education Actuary so excited all that time ago!

Mike Harrison (the Higher Education Actuary)



Sometimes twitter just says wow! This is one of those times!


Response to Department for Work and Pensions consultation on Security and Sustainability in Defined Benefit Pension Schemes


1. The Royal Statistical Society (RSS) is a learned society and professional body, with more than 8,000 members in the UK and across the world. We are one of the world’s leading organisations to promote the importance of statistics and data, and have done so since we were founded in 1834. As a charity, we advocate the key role of statistics and data in society, and we work to ensure that policy formulation and decision making are informed by evidence for the public good.

2. The Society wishes to comment on just one question, question 4h:

“Should the Government consider a statutory over-ride to allow schemes to move to a different index, provided that protection against inflation is maintained? Should this also be for revaluation as well as indexation?”

While the question does not specify which index or indices are to be over-ridden or used as a replacement it is obvious from current circumstances and the text in the consultation document that the intention is to allow schemes that are locked into RPI to move away from it.

3. We are not commenting on whether there should or should not be a statutory override since this decision requires expertise outside our remit. But we feel it appropriate to comment on the statistical qualities of the three main indices (RPI, CPI and CPIH) and their suitability, or lack of it, for uprating or revaluation in pension schemes. None of the three currently meets the need fully in our opinion. While the limitations with the RPI are well known (and sometimes exaggerated), those with the CPI (and by extension CPIH) are often overlooked.

4. An index used for this purpose should not just be technically adequate but should also be capable of enjoying a degree of public confidence. While public confidence is important for all statistics it is crucial for consumer price indices since through indexation they directly affect people’s income and expenditure and this is particularly important in this sensitive context.


5. The RPI is the only index of the three which was designed with uprating (compensation for inflation) purposes in mind as one of its key aims. Features of its design are appropriate for this need. This includes its exclusion of the top 4% of the population by income since this mitigates the problem found generally in consumer price indices where high spending households have greater weight in the index. Its treatment of insurance is also suitable. It also measures owner occupied housing in a way which relates better to actual household costs than CPI and CPIH. Partly for the above reasons and partly as it is long-established it appears to enjoy more public confidence than CPI or CPIH.

6. However the RPI’s use of the Carli index for some categories of expenditure at the first stage of aggregation has rendered it liable to overestimate inflation in certain circumstances. Changes to the methods of collecting clothing prices made in 2010 unfortunately gave rise to conditions in which Carli noticeably overestimates.

7. Technically it should be possible to make adjustments which would reverse the problem caused by the 2010 changes. However clauses in the prospectuses of index-linked gilts (ILGs) issued prior to July 2002 (one of which will be extant until 2030) state that if any change is made to the coverage or the basic calculation of the index which, in the opinion of the Bank of England, constitutes a fundamental change which would be materially detrimental to the interests of the stock-holders, holders can demand immediate redemption of the gilts. This would potentially have a significant adverse impact on public finances so the Statistics and Registration Service Act, 2007, states that such changes can only be made with the consent of the Chancellor of the Exchequer. Adjustments to reverse the 2010 problem seem likely to fall foul of these provisions and therefore cannot be made in practice.


8. The CPI, which is also the EU Harmonised Index for Consumer Prices (HICP) for the UK, was not compiled as a compensation index but for macroeconomic purposes. This was made very clear in the initial EU regulation setting out the framework for the HICP:

“Whereas there is a need for the Community and particularly its fiscal and monetary authorities to have regular and timely consumer price indexes for the purpose of providing comparisons of inflation in the macro-economic and international context as distinct from indexes for national and micro-economic purposes…” [1]

Accordingly it is fully weighted by overall consumer spending so that higher spending households have greater weight. Insurance is weighted only according to the difference between premiums and claims.

9. An acknowledged and serious disadvantage is that it excludes owner occupier housing costs. It uses the Jevons (geometric mean) formula widely at the first stage of aggregation. While more robust than the Carli it can underestimate in certain circumstances, albeit its underestimation tends to be much less severe than Carli’s overestimation. The use of an index using Jevons was originally justified in 2010 as it was said to proxy the way consumers switch towards items which rise less sharply in price but this argument has since been discredited. The use of an argument which was subsequently discredited and the potential for underestimation means that Jevons is regarded with suspicion in some quarters.

10. For the reasons in the preceding paragraphs, the CPI is unlikely to meet the public confidence test. In addition since, as the UK’s HICP, it will remain subject to EU rules, this could also be a politically sensitive issue. Finally, its use would be perceived as unfair given that pension funds will continue to receive RPI-related returns on ILGs.


11. CPIH is essentially the same index as CPI with the addition of owner occupied housing measured according to the rental equivalence theory and (now) council tax. The inclusion of council tax is a positive point for uprating purposes. However the use of rental equivalence (using rents of comparable properties) as a means of measuring owner occupier costs, while arguably justifiable in economic theory, does not always seem credible, particularly to the general public. The behaviour of CPIH so far, showing an inflation rate not very different to that of CPI, does not help. Like CPI it uses Jevons.

12 Thus CPIH could therefore also fail the public confidence test and would also not help the unfairness perception if pension funds were still enjoying RPI related returns on ILGs.

A longer term solution: the Household Costs Index (HCI)

13. In the longer term the solution should be the Household Costs Index currently being developed by the ONS. This will have the same aim as the RPI but should avoid its problems and be designed for the 21st century. It will also be available for different household groups so will offer the possibility of having different indices for pensioners and those of working age if desired. However, it will take some time for this index to be developed, for its feasibility and credibility to be accepted and for teething problems to be ironed out.


14. We urge that if a legislative override for pension schemes locked into RPI is proposed arrangements for the moment should be temporary allowing a switch to the HCI (or to anything else appropriate) once that becomes feasible. In the meantime the government might wish to consider a formula such as “RPI minus x”. The RSS would be happy to take part in any discussions about what “x” should be.


[1] Council Regulation (EC) no 2494/95 of 23 October 1995 concerning harmonized indices of consumer prices.

Submitted by RSS’s Policy and Research Manager, 12 May 20

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