Is Woodford the final straw for active investors?

woodford smile

There will be a lot of private investors inside the gated community of the Woodford Equity Fund (WEI) who will be asking, just what is there to smile about?

This time last week, Hargreaves Lansdown had this fund in their Wealth 50 buy list, Woodford managed over 3% of SJP’s £100bn of  assets and Woodford was a  key manager of the Openwork Omnis proposition. Now SJP and Openwork have sacked Woodford and Hargreaves Lansdown have removed WEI from the buy list.

This is because, following the decision of Kent County Council to withdraw around £260m from WEI, Neil Woodford felt he had no choice but to suspend all dealing and gate WEI. Everything that followed diminishes Woodford’s opportunity to put things right and remaining investors look doomed to suffer a great deal more than they have already.

When Woodford has managed to reorganise his portfolio, he faces a probe from the FCA and the prospect of the companies he is invested in being shorted, his transactions being sabotaged by dealers who have seen his trades coming.

Investors have pulled a staggering £4.3 billion from the fund since assets peaked at £10.2 billion in May 2017, after a torrid three years for the manager.

Woodford Equity Income sits rock bottom of the Investment Association’s UK All Companies sector over that period, down 17.7%.

This is Citywire’s one year rating which again places Woodford plum last,

Screenshot 2019-06-08 at 08.48.05

There is very little for Woodford’s investors to smile about.

I was however amused by one  video published by NMA featuring vox pops from City gents. One fellow looked very smug and told the camera he has had nothing to do with Woodford as he invested in St James Place.

So far so bad, but is this the final straw?

It seems not, St James Place has replaced Woodford not with a passive manager but with Columbia Threadneedle. This seems odd to me. The passive managers have the size and dealing power to create liquidity to trade and after such a disastrous time of late, investors might be looking for a safe haven.

But it seems that SJP policyholders don’t have much say in matters – and that seems to go for their financial advisers too.

Reversion to mean

What the collapse of Woodford is showing us is how vulnerable a contrarian fund manager becomes when his fortunes wane, and how little protection he gets from the platforms he has supported. For 18 years Woodford has built up money for SJP, he was sacked hours after protecting his investors with the gating.

Ironically Threadneedle were created by Allied Dunbar, SJP\s arch rivals in the 1990s as a means of competing with wealth managers. Threadneedle have long since cut ties with former owner Zurich, as have Openwork, formerly the Allied Dunbar direct salesforce.

The close ties between these organisations is still evident, St James Place head office, once dubbed the refugee camp, is only a few miles from Swindon where Allied Dunbar’s Tri-Centre controlled its empire and Signal Point, the HQ for Threadneedle’s operations.

Much has been written about active management performance reverting to mean (as Woodford’s has), not so much about the limitless capacity of the financial services to reward its own. I wonder how many SJP clients – had they not transferred to SJP from Allied Dunbar agencies, might be in Threadneedle funds to this day!

Everyone – asleep at the wheel?

Questions have to be asked about why Woodford was sacked only after the gating of WEI. If SJP and Openwork only employed him to manage parts of their fund proposition,  why did they not take pre-emptive action earlier?

Similarly, just how did things get to the point where Woodford had to gate his fund? Isn’t the liquidity of funds as big as WEI a matter of concern for SJP, Openwork and especially Hargreaves Lansdown- who held the fund directly?

The contagion following Woodford’s WEI clearly included SJP and Openwork’s mandates and may well spread wider as investors consider the issues of liquidity in their active fund portfolios.

If this kind of thing can happen, in full sight of the FCA , to Woodford, who else might be vulnerable. If fund platforms had to wait till Woodford shut the fund to stop recommending it,  what value a Wealth 50 or the service offered by SJP and Openwork?

Is Woodford the final straw?

Not a bit of it.

SJP will continue to recommend active fund management and their clients will continue to pay a high price for variable performance.

This of course doesn’t matter to most clients who are comforted by SJP’s superb customer service and the kudos of having their money run by them.

People want to feed the great maw of financial services, whether in the City or in Cirencester, good luck to them.

But for those of us who consider ourselves Evidenced Based Investors, the chances of us ever returning to active managers – has receded a couple of notches.

Not so much the final straw but another brick in the wall put up to defend our finances from predation.

three little pigs.jpeg

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What does SJP “sacking” Woodford mean?

The relationship between Neil Woodford and SJP is over, SJP sacked Woodford as a manager – that is clear. Since 40% of the funds Woodford managed were for SJP, that makes for a difficult business problem for Woodford, he will have to adjust his business. I am told, by IFA friends on twitter that SJP were not investing in a pooled fund – run by Woodford, but in what is called a segregated mandate, where SJP has the right to hire and fire the managers of the assets but does not have to liquidate the funds if they do so.

This is comforting , the replacement managers of the SJP funds do not have to sell anything till the time is right, and then they only “have” to sell , if there is an imperative to do so. It is becoming clear that the FCA, the Bank of England (through Mark Carney) and SJP (through their own fund governance) feel that something went wrong, but that is all we know.

There is speculation as to how much change the appointment of a new manager will bring.

As with football teams, a change of manager can bring wholesale change or a little bit of tinkering .

But what I had not appreciated, and here I am just showing ignorance, is that not just the customers but the SJP advisers have very little control over who is managing the money, that is a matter for SJP’s fund governance team and advisors.

Which explains Al Cunningham’s comment at the top of this blog. Where Hargreaves Lansdown clients are responsible for deciding on whether or not to own Woodford funds, SJP clients give discretionary control to St James Place as to who manages their money. Quite different models indeed.

So SJP sacking Woodford means more for Woodford than for SJP and its clients

I’m happy to stand corrected on this. I am learning as I go, but this I would say in my defence. It is very far from clear from the press reports about the implications of the change in SJP’s managers and while I am sure SJP are communicating to their clients, they are not communicating to direct investors in Woodford funds (through Hargreaves and elsewhere).

I remain critical of SJP on its fund governance and in particular on the timing of the sacking which happened only once Woodford had to gate his fund because other investors had voted with their feet.

If SJP owned 40% of assets under Woodford management, how had it not dealt with the problems of illiquidity earlier? It is in the nature of segregated mandates that the entity awarding the job mandates how the fund is managed and has the responsibility to ensure that job is being properly carried out.

That SJP only took action once the gate had slammed following the withdrawal of £260m by a Government body, suggests that  SJP were bounced into action.  This I find really surprising as it does not suggest an orderly investment governance process.

Woodford did not become a bad manager overnight, I am told by those who know him that he has been aware of the risks of holding high amounts of illiquid stocks in funds that may need illiquidity and he has lived with this risk for some years. I assume that when Woodford was appointed by SJP they knew of this risk too and that particular controls should have been in place to guard against the problems of the past few months.

I cannot avoid the conclusion that not only has SJP let itself and its clients down, but it has failed all Woodford clients, first by not managing its mandate better and secondly by not sticking with its manager when the going got tough.

Too much transparency?

In a very cute series of tweets , Matthew Bird points out that Woodford was a victim of being too public about what he was investing in.

Now this really is an issue for the Regulator. As I have been writing over the past two weeks, the best way of getting engagement is to tell people where the money is invested.

But if in demonstrating that (an admirable feature of Woodford’s and Terry Smith’s management style), the fund’s investments are shorted by the market, then a number of problems arise

  1. Companies become wary of being quoted of the publicity
  2. Managers become wary of transparency
  3. Investors are returned to darkness and to all the shady dealings that opacity can bring

If what the FCA concludes is that fund managers cannot be transparent about what they hold for fear of short-selling then we have a quite different regulatory issue.

Problems with the fund management model

I find myself reluctantly returning to the position of Robin Powell, the evidence based investor. Chasing returns by changing managers, changing asset allocation , changing investments is a mugs game. Here is Matthew Bird again

Which brings us back to John Kay who asks fundamental questions about the fund management model and finds no answers.

It seems to me that being a top fund manager is about as thankless a task as being a top football manager. You will have your moment in the sun but you are unlikely to avoid sunburn, for every Alex Ferguson of Bill Shankly there are 20 once-loved football managers with reputations in tatters. Today’s Klopp is tomorrow’s Morinho.

For an interesting (if speculative) view of the reasons for SJP and Woodford’s falling out, read Matthew Vincent’s article in the FT Lombard column

If anything, Mr Woodford’s relationship with St James’s Place had to end because the duo had become fundamentally incompatible: St James’s Place an ever more conservative City type, but Woodford still the maverick. Their mistake was to stay with each other for so long.

Learning from experience

Well I’m learning as I go on this – thanks to Al Cunningham , Matthew Bird and several others for setting me right and helping me out (even on the little things like names)

The article has been edited slightly! But the thrust remains the same.

  • Employing conviction-based fund managers who buy and hold is a good thing
  • Transparency of holdings is a good thing.

If Woodford broke the terms of his mandate with SJP, he deserved censure and ultimately sacking. Strong governance of segregated mandates is a good thing and pooled funds need even greater fiduciary oversite. But there is no evidence that he did.

If I am learning about how managers are employed, I can be expected to be pulled up and corrected by good people like Al and Matthew, I learn from being corrected and I hope that those who read my blogs learn from my mistakes too.

What is a bad thing is that many investors are being mucked about and losing considerable amounts of money to the short-sellers because of the collapse in confidence in Neil Woodford and for that – I have to hold those who employed him partially responsible.

If we award managers mandates as long-term investors and sack them when the going gets tough, there have to be good reasons and so far we have not seen those good reasons from SJP. It’s left to Matthew Vincent to speculate that perhaps SJP were asking Woodford to do the wrong job.

Fund analyst Brian Dennehy points out that, in the last month, WEIF was down 8.10 per cent but the supposedly more liquid blue-chip SJP UK High Income was down 8.83 per cent. As a result, the return for SJP clients has been -3.16 per cent since July 2014, while for WEIF investors it has been -1.42 per cent.

The FCA clearly want to look deeper into this and they are right to do so. We need to have confidence not just in the managers, but in those who employ them. What is clear from learning about SJP , is that it is they, not their advisers or their clients – who call the shots. If Woodford only managed to his mandate, the buck stops with the FCA,


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Herding , Woodford and platforms


Adam Norris , the genius behind much of Hargreaves Lansdown’s success told me how he switched money in bulk from Equitable Life onto the HL platform.

He read the society’s rules and discovered that as an Equitable policyholder, he was entitled to a list of all of the other policyholders in the society together with other identifiers

When the list came his way, he matched Equitable policyholders to HL investors, there was a remarkable fit. People who liked Equitable liked Hargreaves Lansdown. All that remained to be done was to invite those who matched to transfer funds to HL on special terms and one of HL’s  most successful marketing campaigns commenced.

I tell the story following the decision taken by various investors to sack Woodford as their fund manager. This from the FT

Wealth manager St James’s Place has terminated its £3.5bn relationship with Neil Woodford, in a devastating blow that leaves Britain’s best-known fund manager fighting to save his business.

The decision — which wipes out 40 per cent of Mr Woodford’s assets under management — continues a disastrous week for the famed stockpicker, who was forced to freeze his flagship fund on Monday to halt an investor exodus.

Money that comes easy, leaves easy and the rules of diversifying your distribution apply equally to Terry Smith and Nick Train (Fundsmith and Lindsell Train respectively). If your investors are coming to you in herds, then you had better have an effective way to manage them leaving in herds.

The FT also report that the FCA , he UK’s financial watchdog is examining the approach of the fund and its stance on European rules that cap investments in unlisted assets.

I hope they are considering the role of platforms too. The action of SJP will do little for the remaining investors who are standing by Woodford and his funds. They will now have to suffer the consequences of Woodford losing 40% of his funds under management. It will be interesting to see what happens when the gate re-opens

The consequences of any disinvestment will be felt most amongst the companies into which the funds are invested, many of which have not got much liquidity. What SJP’s action means is that many people’s jobs will be put at risk as well as a lot of shareholder equity.

Where stocks are sold where there is market liquidity, then the consequences of disinvestment on this scale will include huge spreads as the market sees the trades coming. This of course will impact SJP’s holdings in former Woodford funds.

Shareholders accepted Woodford’s money on the basis of it being long-term “patient” capital, Woodford presumably saw SJP as a long-term partner as well.

I am quite sure that the consequences of SJP’s actions will be severe and widespread. I am far from clear they are in the best interest of anyone.

Woodford’s recent statement on the gating of his flagship fund came before the news from SJP

Herding, Woodford and Platforms

The blog started by demonstrating how well organised platforms can move money in bulk. The Equitable Life policyholders were naturally attracted to Hargreaves Lansdown who have served them well since.

HL removed Woodford from its Wealth 50. Its statement on its position on Woodford’s funds and the gating can be read here.

SJP has not entered a fire sale (the mandate has been passed to Columbia Threadneedle who will be charged with re-organising the fund). ,But SJP, like HL – have severely undermined confidence in Woodford and further undermined confidence in active fund management.

I hope that matters will work out for SJP and Hargreaves Lansdown investors, but can see few winners from this. Platforms, model portfolios and lists like Wealth 50 encourage a concentration of investment which carries the risks of herding.

When things go wrong for the crowd, as Equitable Life found, they go wrong big-time.

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Getting youngsters saving more


Telling youngsters to save more is a waste of time

It’s been a sad 48 hours on twitter watching the wolf pack turn on Paul Claireaux for his cappuccino blog – where Paul postulates that a youngster could have a markedly better retirement for giving up a cappuccino a day and saving the money into a pension pot.

There are many other versions of this argument – it used to be done with packets of fags and NEST are trying it with their sidecar. All are versions on  nudge with a sexy theme disguising a fairly tame idea – “save what you don’t miss”.

Unfortunately people do miss their coffee and fags and low-paid people don’t always stay in the sidecar saving employment. Anyway, the amounts saved rarely amount to enough in practice and the grand plan depends on things that don’t often happen – continuity, perseverance and the right set of financial assumptions.

Oh and if we can’t be bothered to give low-earning people the promised incentives to save, who are we to preach the value of saving anyway?

My problem with financial education is that it’s usually those that have the money teaching those that haven’t how to be like them – and young people don’t necessarily see people like me as role models. Even if they do, the last thing youngsters would admire in a baby boomer was his or her pension.  Financial education is at heart paternalism and youngsters don’t take kindly to that.

There are literally hundreds of tweets on my timeline arguing about cappuccino pensions. What a waste of time – when that time could be spent on getting a better futures

Spending on a better future

The paternalism of financial education usually manifests itself in a demand for self-denial called “saving”. Telling people to save doesn’t go down well but showing people how to spend does – it is the basis of advertising and behaviourally it is a much more effective way of going about things. Spending on a better future begs the question – spending on what?

By a strange coincidence, I am doing three presentations today , which will all incorporate this message. This morning I’m talking with a high street bank on how to get millennials saving more, at lunchtime I’m talking with the Equity Release Council about helping older people spend their savings and this afternoon I’m talking with payroll people about promoting workplace pensions.

In all three talks I plan to focus on spending not saving and on making use of assets like pension pots and houses and work income to spend on a better future.

We all renters

We live on borrowed time, our lease of life expires not when we choose but when we are chosen. Many young people are renting and have no plan to buy, they own less and less, subscribe to more and more. Ownership is not even an aspiration for many millennials.

For younger people, the future seems out of their hands and they are determined to take control. We see this in their determination to reduce emissions and decelerate global warming. And if we ask people about their savings , they want to know where their money is invested and to take control of investment decisions. Once more – watch this video.

In a world where we cannot or don’t want to own, we can at least steward.  The planet is ours to save, let’s spend on a better future.

Turning savers into spenders , spenders into stewards

Our time would be better spent showing people how their savings are invested and giving them the chance to make positive decisions on how their money is spent.

I mean by spent – invested, but people need to understand what is happening to their money after it leaves their bank account, their payslip – even their bricks and mortar.

Giving people a clear picture of what happens to their money is critical to keeping their interest.

Instead of issuing people with annual statements full of financial jargon and compliance warnings, we could be reporting on how money has been spent. The only fund manager I have known who does this is Terry Smith – and look how successful Fundsmith is.

And of course, when we have turned savers into spenders and spenders into stewards, we have changed the nature of saving for the better.

We do not need wealth , we need to pay the rent

This blog challenges the conventional view of pensions as wealth and replaces it with a view of pensions as a way of paying the rent. This is the new reality for many youngsters.

We should stop confusing the need to pay the rent with ownership, stop suggesting that we can dive into our pension savings to put down deposits on houses.  We need pensions to pay the rent – not to amass housing equity,

We need to stop thinking of pensions as a means of becoming wealthy and start thinking about our responsibility to each other not to become a burden in later age. Investing in our retirements should be a deeply satisfying – socially responsible behaviour.

Appealing to the responsible instincts of young people is much more likely to win their hearts than appealing to their greed.

If we are to get people to take pensions seriously, especially young people, we need to forget  about swapping pensions for home ownership.  We need instead to get people using the collective power of our pension pots to do good things. This starts one person at a time.

So when I talk today to that big high street bank, and the equity release council and to the payroll  community, I’ll be talking about this paradigm shift that is needed to get people saving more. I hope to meet some of you during the day!




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Millennial fightback

The greatest current threat to motor manufacturers is that people no longer want to drive. The second biggest threat is that people no longer want to own a car. That’s the message that comes loud and clear from an article in the FT that features the Volvo car stand with no cars on it.

Screenshot 2019-06-04 at 05.43.43

I have to admit a reluctance to get in my car myself, my personal mileage was below 5000 miles last year and I keep my car out of nostalgia and for the personal number plate S4 HEN – which tells me who I’m owned by!

Car’s are not alone – what about houses?

The value of owning a record collection, of philately , of wine cellars – all seem to have dropped. People who I talk to who are under 35 no longer value themselves in terms of what they own. I suspect that we are returning to a different set of values that may be rather less materialistic and (dare I say it) more spiritual.

I suspect that houses are also way down on value. Owning property is certainly not a priority for my son (who was bullied into getting a driving licence but who has never used it – other than as identification).

Is this behaviour a result of pragmatism, or does it continue a trend we are seeing?

If young people fall out of love with home ownership, what will this mean to the value of older people’s housing stock? Will the equity on which so many of us rely for financial security prove illusory?

A house is only worth what someone is prepared to pay for it and as we age, there is a very real chance that ownership rates amongst older people will fall. The lack of income arising from pensions will inevitably place greater reliance on equity release and the lifetime mortgages which pass property from self ownership to the ownership of lenders.

Milennial fightback

There is only one way for millennials and that is to take control. Historically that has been through securing ownership of cars, houses and possessions.

I don’t see the urge to control today among younger people who are quite happy to stream services and use them on demand.

Instead of owning, millennials are investing heavily in themselves. They are taking jobs that are interesting and rewarding in themselves, not just a means to get a mortgage.

They are buying into training and taking an inordinate interest in their personal finances. Bloggers like Iona Bain – of young money – are the new Martin Lewis’ but they are talking to a new generation more interested in how their money is invested than what to buy with their savings.

I am dubbing this “millennial fightback” as it is their way of dealing with the impossibility of competing with the baby boomers on the baby boomers terms.

A car stand with no cars

The motor industry is first to feel the wave of change. The shift towards car- leasing or in the most extreme – Zip car – is illustrative of a new way of dealing with ownership – that moves from the balance sheet to profit and loss. Kids no longer want a balance sheet weighed down by personal possessions which they see as liabilities as much as assets.

This has profound implications for the savings industry too.

We must recognise it is not the valuation of an asset that is most important to a young person but its utility under ownership.

People are already moving away from conventional measures of worth (the valuation) to a different measure “the value of their money”. If you start valuing your money by what it is doing , then your interest is in the investment itself – what it does – not what other people will pay for it. People are interested in cars as a service , not as objects and property and even savings  may follow.

How this plays in pensions

There seem to me to be two competing views of pensions . Those who see pensions as part of wealth are owners. Those who see pensions as a means of doing things, are renters.

We do not of course own ourselves freehold, our lives are on leases which expire when we do. Younger people do not even take for granted ownership of the planet which they see as under existential threat, they may possess a blighted planet when their parents are gone.

This sense of possession rather than ownership could mean a reversion to a view of a pension as something that does something rather than as a balance sheet item.

Currently the  “pensions are wealth”  brigade dominate the agenda and have pretty well excluded the idea of pension as a utility.

But that is likely to change over generations. The question for pension providers today is how to ride both horses in mid-stream.

horses stream

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Impact investing – follow your heart!


Putting your money where your heart is.

I’m pleased to hear that steps are being taken to research the best opportunities for savers to make a difference with their money. Whether this is the voluntary saving we do into ISAs or the saving we do at work for later life , most of us don’t know where our money goes. This Quietroom video makes that quite clear.

But the good news is that if we did know where our money went and liked the destination – we’d be minded to save more. Again there’s a video Quietroom video about that.

It seems that many of us not only want our money invested better, but would put more money where our heart is.

Finding out who’s doing good stuff

I was pleased to read this FT article over my cornflakes. It looks like two city high-fliers are giving up managing money and taking up researching who’s doing good stuff. The idea is that ordinary people can access good stuff through funds that specialise in good stuff – which is all that we need to know right now.

Of course you can invest directly in good stuff (thanks for the investment to AgeWage) through crowd funding platform, you can employ digital allocators which point your money at the good  stuff (try TICKR) but someone is going to have find the good stuff in the first place.

So step forward Elizabeth Corley and Harvey McGrath to set up the Impact Investing Institute.

The FT tells us that the Impact Investing Institute will not manage assets but will conduct research and press for more funds to be allocated to the sector, particularly from ordinary savers.

It would be nice if they were to put up a website so I could share more. You can get a feel for what’s going on from UK National Advisory Board on Impact Investing

The  NAB spawned this new body as did the Implementation Group of a Government report called “Growing a Culture of Social Impact investing” , which you can download .

There is a short summary of the report here

The problem is no-one knows all this stuff is going on, the Govt report is two years old and so it’s important that all this high level thinking joins up with what is going on at the grass roots level.

AgeWage and Social Impact

It will not surprise you in the least to hear that AgeWage is keen to promote social impact in the workplace pensions and the SIPPs we’ll be working with.

Infact we’re applying for a grant from Innovate UK to help ordinary people find out which of the funds they can invest in – does what – and what the financial impact for them and the social impact for us – would be – by switching investment to a better place.

Of course you don’t have to switch, you can put pressure on the people who manage your money (fund and asset managers). But more easily, you can put pressure on the people who have a duty of care to select the right funds, to do that for you. These people are called IGCs and Trustees and they’re supposed to be our representatives, making sure that we get the opportunity to invest in funds with social impact.

For instance the FutureWorld funds of L&G which you can access at Pensions Bee, or if you are in an L&G workplace pension. I was drawn to these funds by a fantastic presentation by L&G’s CEO – Nigel Wilson, who explained how he wanted the money that was invested in workplace pensions – to be invested for good.

AgeWage reckons that it can play a positive part in lobbying IGCs and MasterTrusts to raise their game and it will – especially if we get the financial help), be able to build support for ordinary people. Just look at what TICKR is doing for ISAs

How we can get involved

Whether it be at the consumer level (TICKR or AgeWage or at the high fallutin’ research level of NAB and the Impact Investing Group), it’s clear that the nature of investing is going to change. People want to invest for good and that doesn’t mean trying to outwit other fund managers to get a better return.

There are organisations like Heart of the City, dedicated to cleaning the City’s act up. It’s encouraging  investing in  fundamentally good things and making sure that badly run investments are turned round by better management coming from better governance.

But there is a world of difference between HOC and its membership and the people featured in the Quietroom videos

Progress also means reaching out to people like Elizabeth Corley and Harvey McGrath so that the people on the ground get wind of their work – and they get wind of the people on the ground!

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Pension PlayPen lunch – “are we better off out?”

Pension Play Pen lunch – Monday June 3rd 2019

Brexit and Trexit

Brexit and Trexit are in the news, we all know about Brexit – some know about Trinity College Cambridge’s unilateral departure from USS (Tr-exit). Is Trinity College better off out….. and is Britain?

Does collectivism have a role in today’s world?

Should the strong shoulder the weak?

Who picks up the bill if they do?

Is the bill worth worrying about?

The Pension Play Pen meets as it has met the first business Monday of the month for the past 10 years. We will this week be downstairs at the back (not upstairs) in the Counting House and we will be meeting at 12pm, eating at 12.30 and breaking at 1.30 for a more formal conversation.

All are welcome, the cost will be c £15 shared between us and I look forward to seeing you in the Counting House at Monday lunchtime.

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Thoughts on Jo Grady’s letter to the Trinity dons

The True Life Great Court Run

Here’s Jo Grady’s open letter and I think it’s worth some thinking about. Trinity College Cambridge, the one who’s Great Court is supposed to feature in Chariots of Fire, is rich.

It is rich because of endowments given to it over the past six hundred years. Money that it keeps for the good of education, not for the greater glory of Trinity College.

It’s not in fact Tinity’s but Eton’s great court that features in the film. According to my source (Charles Payne), Trinity were worried about how the film would portray Trinity.

Some things don’t change, Trinity is now worried about the damage to the college of being in a last man standing pension scheme,

I have a son at Girton College Cambridge and I was at Selwyn College Cambridge, I know that the wealth of Trinity supports the reputation of Cambridge University – including the other – less well endowed – colleges.

The Trinity endowment also supports the University Superannuation Scheme. If Trinity were to withdraw from USS, it would put in peril the current covenant assessment of the scheme requiring higher contributions from other universities and colleges and putting in peril future accrual for all academics. The endowment backs the covenant.

Having recently been through a year of academic disruption many of Trinity’s students have already suffered from the unnecessary dispute over the USS valuation.

Trinity’s action now puts at risk the fragile peace between the employers, trustees and regulators of the pension scheme. It is deeply regrettable that Trinity is even thinking of taking this action.

Unsurprisingly, emotions at Cambridge University are running high and there is a threat of a boycott in teaching Trinity students from other college staff.

It may be that the letter is already redundant as is suggested in this twitter exchange.

However, experience tells me that where there is a will there is a way. Even if Trinity is lost to USS, the letter and the campaign help prevent a second Trinity (or Trexit as it’s known)


Wednesday 29 May 2019

To the Fellows of Trinity College, Cambridge

As Fellows of Trinity College, you are aware that your Council, in its capacity as the College’s governing body, has voted to leave the USS pension scheme. I am writing in my capacity as General Secretary Elect of the University and College Union, because the Council’s decision has become a matter of national rather than local significance. You deserve to know exactly what is at stake.

People often speak about the need for different institutions in the Higher Education sector to stand in solidarity with one another. In this case, a small act of solidarity would make a massive material difference for all of us, including you. We have learnt in the last few days that Trinity’s departure gives USS a pretext to downgrade its assessment of the ‘employer covenant’. The practical consequence of this is that if one more similar employer leaves, the Scheme will demand higher contributions from those who remain, or significant cuts in the benefits promised to members.

You have a stark choice. Overturn your Council, or let it threaten the sustainability of the largest private pension scheme in the country: a scheme that provides a good, guaranteed retirement income for you and hundreds of thousands of your colleagues.

Your College will not benefit from the decision to exit. There is no plausible scenario in which USS will need to call on Trinity’s assets. In fact, Trinity’s £1.4bn endowment faces more risk of being wiped out by sudden, unexpected economic downturns and other adverse changes than USS’s globally diversified, £64bn fund, which is backed by many more sponsors, including the universities of Oxford and Cambridge. The reports commissioned by the Council so far are incoherent, inadequate, and often inaccurate. They have not explained or weighed up the risks that actually face the College and the Scheme. You have not been given the kind of expert advice you need if you are to evaluate the Council’s plans properly.

The sum which Trinity is expected to pay to leave USS – thirty million pounds – is a waste. It includes a very large insurance premium. It is twice as much as the amount that would be due to Trinity’s pensioners if the College remained in the Scheme, even on the overly cautious assessment of the liabilities that has been roundly criticised by the Joint Expert Panel (JEP).

The waste of the College’s money will not be the only detrimental effect. As Fellows, you will almost certainly suffer personal losses. If you move to a smaller, College-specific scheme, its trustees and sponsor will encounter far fewer obstacles to reducing Fellows’ benefits than USS employers do at present.

The events of the last 18 months have taught us all the value of sticking together. As a Union, we protected our pension scheme last year by going on strike. Members of your College joined us on the picket lines, from the New Museums to West Road and Sidgwick Avenue. Students occupied the Old Schools, met with the Vice Chancellor, and successfully pressed him to change the University’s position on the USS valuation. If we had not acted, all of us would already be on a vastly inferior ‘Defined Contribution’ scheme. We cannot forget the value of collective action in defense of institutions like USS, that bind our sector together and guarantee a good standard of living for university staff, no matter where they work.

Hundreds of Cambridge academics have already threatened and UCU’s Congress has just resolved that if the College does proceed to sever itself from the rest of the sector, you will be on the receiving end of a boycott. This boycott will target your dependence on the rest of Cambridge and the wider academic community. Along with many other UCU Congress delegates, I voted to make that boycott UCU’s official policy and will pursue it vigorously as General Secretary. Do not let your Council hurt your students and your research by continuing on its current course of action.

My understanding is that at the time of writing, you may still be able to call a meeting of enough Fellows to reverse the Council’s decision, or take other measures against its poorly-informed, irresponsible, and destructive choice. In the meantime, please email me if you have any questions about the decision your Council is taking, or about the Union’s policy regarding USS and your College. 

Please do whatever you can in the time you have left.


Dr Jo Grady

General Secretary Elect

University and College Union

Posted in pensions | Tagged , , , | 2 Comments

We all love disruptors till we feel disrupted!


Yesterday I wrote a blog in favour of annuities and Britain’s favourite annuity broker – Retirement Line. My argument was that some of the best retirement income ideas and one of our best brokers are unknown.

What a hullaballoo ensued! My blog was unbalanced

My blog said nothing new


My blog was an advert

I was monetising my blog


My blog wasn’t worthy of my blog

My blog was deeply misleading


Just what is wrong with Retirement Line, Annuity Broking and advertising a service?

I get the feeling that Retirement Line are eating someone’s lunch and that I’ve just walked into an advisory war-zone.

I’ve no idea why my post should be reckoned deeply misleading, I do believe there is a strong case for fixed term annuities as I reckon annuity rates are likely to go up, not just when we see QE unwind but because mortality assumptions are changing in the direction of better annuity rates.

I appreciate that fixed term annuities carry certain risks which are advertised in the link to the MAS guide which you can follow here. If anyone thinks that annuity rates will go down , they can lock into lifetime annuities today. They would do well to use the open market option offered by Retirement Line and to make sure they get any enhancements available to them.

That I didn’t know about Fixed Term Annuities, suggests that most people don’t know about them. Most people don’t know much about annuities at all, which is a shame as they suit a lot of people who want a wage for life.

Research from Aon and from Tilney BestInvest suggests that annuities remain the best way for many people to turn their pension pot into a pension income.

What is wrong with adverts?

My blog is a series of adverts. I advertise Pension PlayPen, AgeWage, First Actuarial , FABI, CDC  and annuities.

Some of these earn me money (AgeWage, First Actuarial) some lose me money (Pension PlayPen) and the remainder are advertised out of my conviction.

People want conviction. If along the way, my conviction gets in the way of your business model then so be it. We are unlikely to work together!

If my blog did not have the courage of my conviction, no one would read it. I will continue to promote ideas and businesses that I support and Retirement Line is a business I support. I may well speak with them about my pension pot if I cannot see a way to exchanging it for a CDC pension.

What is wrong with adverts?

Feeling disrupted?

If you are one of the people who feel angry about my blog, ask yourself why.

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If you feel I have been disingenuous, as Brian Gannon did, then you can say so in the comments on my blog. I don’t edit those comments or take them down – unless they are spam

But the passion of your response is probably born out of insecurity with your current views or those of your business and you should ask yourself whether you’re angry about my being misleading – or my being challenging.

CDC and Annuities are linked in several of the responses I’ve got and I suspect that both are seen as a threat to advised drawdown. I don’t think that advised drawdown is under threat, there is high demand for it and low levels of supply. At the moment, advisers can make a good living out of it with relatively little challenge. It is not a particularly competitive market and the FCA knows it.

CDC and Annuities have the potential to challenge advised drawdown and the margins it is paying fund managers, platform providers and advisors.

If annuities  are offered to ordinary people by Retirement Line then that is good. Retirement Line tell me they refer many inquiries on to advisers for help on drawdown , equity release and other advised products.

Rather than feeling angry about Retirement Line and the ideas in my blog, advisers should be beating a path to Fletton and join the increasing number of intermediaries working with David Slater & Co.

Posted in pensions | 1 Comment

Pension Income’s best kept secret

best kept secret

Did you know that when you buy an annuity you can change your mind?


Well neither did I. I thought that once you handed your money over to an insurer that it was it, an income for life with no second chances if you wanted your capital back, wanted to re-broke your annuity if annuity rates rose or if your health deteriorated.

On all counts I was wrong and I’m pondering why I have been under labouring under such an illusion.

It turns out that there are such things as “Fixed term annuities” which are renewable convertible products. That means that every three or five years you can re-establish the rate of your annuity based on the rates available at the time and these might be a lot more favourable to you – if interest rates move up or your life expectancy decreases.

I have found all about this by meeting David Slater, doyen of annuity salesmen and Founder of Retirement Line – Britain’s largest annuity broker.

Retirement Line

Retirement Line

Like Fixed Rate Annuities, Retirement Line is a well kept secret, you’ll find them if you google annuities but you’ll have trouble finding them on a map, their offices are tucked away at the back of an industrial estate in Fletton – home of the Fletton brick – somewhere outside Peterborough.

Retirement Line doesn’t bang any drum, they just get on with help people turn pension pots into pension income – my kind of company. Their literature is full of useful information on the types of annuity you can buy, including a helpful tariff of improvements in your annuity rates depending on the life-threatening ailment you’ve been diagnosed with. They are nothing if not straight talking.

With Trust Pilot scores above 9.9, they are clearly a well-loved secret too.

So why is all this so little talked about?

“When people are asked what they want in retirement – they describe an annuity”

This is a favourite line of Kevin Wesbroom who’s company- Aon – surveyed individual customers and found that 62% assumed, aspired to and anticipated getting an annuity stream from their pension savings.

Pace John Quinlivan and all my friends who tell me that annuities do not provide the shape of income that matches people’s in retirement spending patterns, people like the certainty that their money lasts as long as they do.

Until , that is, they see the rate at which they are converting their savings into a lifetime income.

Why are annuity rates so low at the moment?

Annuity rates are so low, for the same reason that mortgage rates are so low, it’s because for the past 10 years we have been recovering from a financial crisis that nearly wiped out our banks and brought this country to the brink of catastrophe.

Ever since 2009, fiscal policy in this country has been to depress interest rates by flooding the market with Government issued money that has kept both interest rates and gilt yields on the floor. Interest rates and gilt yields drive annuity rates – which is why annuity rates are so low.

Taking a bet that interest rates will stay this low for the next 35 years, which is what a healthy person does when buying an annuity at 60  – is a big bet. It’s speculative. It’s actually very risky, because if interest and inflation rates do go up, the level of income you’ve locked into today, will – in real terms – fall behind the cost of living.

Why I like the new fixed term annuity market.

The fixed term annuity reduces the risk of timing your annuity purchase so that you can look forward to giving yourself a pay-rise if circumstances move in your favour, or renewing what you’ve got – if they don’t.

Fixed rate annuities put you back in control – they effectively give you freedom from a pension rate for life.

I wouldn’t go so far as to say they give you the freedom you get from drawdown, but they give you certainty that you don’t get from an invested product from drawdown (or even CDC).

For people who feel queasy about the possibility that they will have to cut back their income from pension drawdown because of being invested in the markets, fixed rate annuities look a good bet. Similarly for disgustingly healthy people who can’t get an enhancement on their annuity rate – but fear for their future health- fixed rate annuities are a good idea.

You can find out more about fixed term annuities from Retirement Line or by going to the Money and Pension Service website which contains a fuller explanation. (Thanks to Brian Gannon and his comment on this – for alerting me)

Why I like the new enhanced annuity market

Enhanced annuities are something that everyone should explore, when you buy one is the one time in your life you can tell people how horribly unhealthy your lifestyle really is- though your body has got to prove it.

I don’t suppose that many people like to admit their fear of dying too early , but this is the one time when it pays to be honest!

A skilful annuity broker is on your side, helping you to get the best rate – within the underwriting limits of enhanced annuity providers. Nobody should buy an annuity without exploring whether they can get an enhancement – and most people can. The fact is that if you don’t ask – you won’t get. Annuity brokers ask – that’s their job.

Why I like an invested annuity market

In recent times, the annuity market has improved for consumers because of relaxation of rules governing the assets that insurers can buy to back up the annuity promise.

Nowadays, your annuity may be backed not just by gilts but by lifetime mortgages – often issued with the money you’ve handed over from your pension pot. Lifetime mortgages – aka equity release – enable people who have insufficient pension savings to swap the equity in their house for a lifetime income. They do so with your money, the insurer is simply  the intermediary – in a very real sense you are helping your neighbour out.

I hope that annuities will become more transparent so that people who sell their pension pots to insurers in return for an income for life, can see what happens to the money after it has gone.

Why should your money – the money you’ve saved, not be put to good use – why shouldn’t it have social purpose and be a force for good? In short – why shouldn’t the principles that underly all good investments – not apply to annuities. ESG should apply to annuities- annuities should be invested with social purpose and have a positive societal impact.

Above all, annuities should be invested rather than just being sunk into Government debt.

There’s risk – risk in everything – that’s how the light gets in

Of course there are risks attached to the new type of annuity. The further we move away from the risk free backing product – gilts, the more risk there is that the insurer will have insufficient assets backing the annuity. But insurers have reserves to meet such shortfalls and are subject to the rigid solvency rules applied by the Prudential Regulatory Authority. We have not had an insurance company go bust (thought the Equitable Life came close). In insurance companies we trust.

Allowing insurance companies to take more risk is a good thing, not only does it mean they can invest in real things – (L&G want annuities to be backed by the income from house they build to sort the housing crisis), but it means that we get better rates and there is more competition as insurers become more innovative.

Why I like Retirement Line

For a consumer like you and me to take advantage of this innovation , we need a trusted broker. I think Retirement Line are trusted – so does Trust Pilot – and the fact that they are Britain’s largest annuity broker suggests that a lot of other people do too.

Business model  Most annuity brokers suffered when Pension Freedoms arrived, so did Retirement Line. Slater had to lay staff off and had to change the name of his business (which was called Annuity Line). But he now talks of Osborne’s Freedoms as him manna from heaven, they gave his business the opportunity to become market leader -an opportunity he’s taken.

Trusted; Retirement Line not only knows the market but to a large extent it makes the market. It is vital that we can trust the market makers and people trust Retirement Line.

Governance; This is particularly important in a closed market like annuity broking, where we know so little. If it is a “best kept secret” market – it needs to be properly governed.

Competition There are only a small number of annuity providers out there, but they aren’t “me too”. They genuinely compete for your business and that means you have choice both in the type of annuity you buy, and in the rate on offer (both for standard and enhanced annuities).

Expertise;This is a highly specialised area of finance and it pays to have an expert on your side. I get the feeling that is what Retirement Line do.

Transparency;Of course all this costs, even though Retirement Line are stuck out in the sticks, their people tell me they are well paid and David Slater drives a smart Merc. This is a business that takes money from providers for doing the work for you and – in the case of fixed annuities, can do so every few years! It’s in their and your interests to stay in touch but don’t think that all this help comes for free.

Value for money; But this is where I am happy to employ an intermediary as there is no way that I could do the job that Retirement Line does, nor get the rates that they do. We have to trust these guys to give Value for Money, but – having visited them twice in the past five years -once before April 2014 and once after, I see remarkable consistency in the way this business is run.

Pension income specialists; So if you are making retirement choices right now- get in touch with Retirement Line. I hope that AgeWage and Retirement Line will be able to work together in future – an AgeWage is a pension income – which is what David Slater and his 70 staff – aim to give you – to the max.

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Posted in annuity, pensions | Tagged , , , , | 4 Comments