Why value for money must be assessed on saver’s data

The numbers in the boxes above  show how much value a group of savers have done with £523m invested in their pots. On the face of it, they have got a better return on average (4.75%) than if they’d been invested in a benchmark fund (3.85%) and we say that they have scored 58 – considerably higher than the average scheme where the benchmark is 50.  At a scheme level, this workplace pension can say that it is giving value for money.

Imagine being told that your pension provider was giving you value for money only to find that you had suffered chronic under performance by comparison to your colleagues.

The idea that a pension provider is giving value for  money simply because a value for money/member tells you so should come with this risk warning

“Our assessment is based on generalities, we can’t tell you whether you’ve got value for money from us, you’ll have to work this out for yourself (or get an IFA to help you)”.

Take a look at this chart that speaks to the experience of around 11,000 people in an occupational pension scheme.

You can see from the chart that the vast majority of savers got positive returns of between 4 and 8% pa after all costs but that there was a long tail of lower scores and around 10% of savers who did considerably better than average.

When these savers are compared to a benchmark fund, the distribution of results is  dispersed in a slightly different way

the majority of savers have scored better than average (50) but the long tail of low IRRs is much thinner. Only around 0.5% of the sample have got really poor value for money and only about 10% of the members have done worse than an average score.

This would suggest that in general the scheme is giving better than average value for money but the risk warning applies, you may be in a performing scheme but not be doing so well yourself.

Based on your data

What is different about this approach to value for money scoring is that it is based on people’s experience, not on a high-level estimate based on feeds from fund managers and charges worked out with reference to charging methodologies and expressed in terms of reduction in yield, TER or total cost of ownership.

These IRRs and scores are based on real information and the value for money assessment this scheme provided itself with showed that while the overall score for the average scheme member was well above average, there were winners and losers , based on their data.

In a DC scheme everyone carries their own risk

This may seem obvious, but it’s only when you start digging into the reasons for very low or high IRRs and bench-marked IRRs that you start understanding the actual risks that people are taking.

One of the prime reasons for low scores is the choice of assets. People who choose to invest for the long-term using money market funds that give a return on cash typically find themselves getting a bottom decile return, but there are other reasons.

Markets and funds can produce price spikes and troughs

Find yourself investing into  a highly volatile fund on a spike and you may find yourself struggling to get yourself value from it. If you are investing a lump sum like a transfer, a bonus or simply money from savings, you are taking a risk which you don’t take from regular even contributions (this is known as pounds cost averaging). Of course you could be lucky and invest in a trough and the difference between the lucky and cursed is what can give a dispersion of IRRs and AgeWage scores between those in a single fund.

Of course this assumes that your contributions got properly invested and a careful examination of contribution histories often shows that contributions can go unrecorded, mis-recorded or even recorded where no units were purchased. Such anomalies are rare but they get picked up by IRRs and AgeWage scores because they produce anomalies in the distribution (we call these anomalies outliers). Quite often plan administrators have discovered outliers have identified  faulty data.

Improving outcomes for those in DC schemes.

The DWP at the end of last week, produced an important consultation on improving outcomes for members of Defined Contribution pension schemes.

At the heart of the consultation is a proposal for a much more vigorous assessment of value for money to be applied by the trustees of smaller DC schemes (with less than £100m in them).

The idea is that the assessments can be compared to assessments of other schemes (which may have better metrics) with a view to trustees winding up their under-performing scheme and transferring members into a better plan

The principle is bang on as are the measures to assess (performance, costs, governance and record keeping).

But in practice, but rather than use scheme records, the report recommends using high level fund and cost and charges data and taking trustees word for it on the quality of member data.

I think this does not go far enough. It treats individuals as if they were part of a collective pension – whereas they are effectively managing their own risks.

And the complexity of the reporting makes comparisons look extremely difficult.

Any collective statement about value for money must come with a risk warning that states that the collective assessment should not be relied on by individuals. And at scheme level, it should allow schemes to be compared, not just by the generalities, but by the dispersion of results

But individuals have a right to know how they have done – and schemes who do value assessments based on their member’s actual data, can show members their individual performance bench-marked against a relevant index.

Value assessments conducted using member data can also shine a light on savers whose results do not make a lot of sense , highlighting areas where work on data may be required. The advantages to providers looking to get their data dashboard ready are obvious.

A final thought

The DWP’s aim is to drive consolidation which (for a variety of reasons) they believe will lead to better outcomes. In most cases they will be right. But in order for them to use value for money as a means of comparing  schemes, we are going to have to get a lot better at assessing value.

I go into this in more detail in this recent blog.  We are likely to see much change in the market for DC provision as a result of the DWP’s work (and work of the FCA on VFM). It is critical that we get this right. The DWP’s consultation runs to the end of October and I will be focusing on this issue in the next six weeks. Get this right and we really can improve the outcomes of those saving into DC pensions.

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Net pay pension problems? – don’t leave them to the Treasury

Are the Treasury really bothered?

The headline is misleading, the Treasury are not looking for solutions, they are looking for the long-grass ;  unless people who give a damn , tell the Treasury to pull their finger out, 1.7m low earners will continue to overpay their pension contributions by 25%.

The 1.7m in question have no idea what they are missing and have no voice. You can be their voice by responding to HMT’s call for evidence.

Scroll to the bottom of the blog for details of how- better still – read the blog first!

Exposing the five myths the Treasury depend on

Myth one1.7m low-earning people are missing on tax-relief. This is wrong, you get tax-relief when you pay tax and the 1.7m do not pay income tax. They have been promised an incentive to save which amounts to 25% of their personal contributions and they are not getting this incentive because their employer put them in the wrong kind of pension scheme. The incentive to save is theirs by right and has is not tax-relief.

Myth two there is no easy solution to this problem. The low income tax group have put forward a simple solution to this problem using the P800 year end sweep up. The Treasury are failing to engage with this solution which relies on real time information putting up a variety of excuses about this being too expensive. The independent estimates for the implementation of the P800 solution are a paltry £10m – chicken feed to HMRC

Myth threethis is too hard in the time of the pandemic. HMRC have excelled themselves through the pandemic showing a can do attitude which is precisely what they are not showing at the moment.

Myth four this will all come out in the wash when HMT reforms pension tax-relief. Whatever Rishi Sushak does in November (including not having an autumn budget) there is no certainty that pension tax relief will be reformed and no certainty that those reforms will solve the net pay problem. The Treasury are keen to link tax-relief reform to not having to do anything for now on net-pay, but there’s nothing shaking on the tax trees right now.

Myth fivethere’s no point in responding to this consultation. There is nothing that the beastly taxman would like more than you to sit on your keyboard and not respond. That would give them the perfect excuse to put the consultation in the “one for tomorrow” draw.

There is no justice like social justice

HMRC recently published 10 year strategy includes these brave words.

HMRC are likely to evolve as an organisation central to our UK national resilience and crisis response, as well as discharging their traditional role as a tax authority. For this they need to maintain the trust and consent both of taxpayers and of the wider public. There is much evidence from around the world that modernisation can help to build that trust and consent.

If you are thinking of responding to the Treasury, then please remind them that the people who have been hardest by COVID-19 are the people who have least in the way of financial resources. They figure largely among the 1.7m missing out on their promised incentive.

There is a natural bias in pensions to reward the wealthy and take the poor for granted. Auto-enrolment is supposed to include all workers and a great number do get the incentive. But 1.7m is a very large number to be missing out on an extra £6 per month in the pay packet and if that doesn’t sound very much to you, you clearly earn too much!

The government would welcome responses to this call for evidence by 11pm
on 13 October 2020.

 Responses can be sent to:

Pensions and Savings Team
HM Treasury
1 Horse Guards Road


Or if you don’t have a printer or can’t get to the postbox. You can email





Posted in Force for Good, pensions | Tagged , , , , | 2 Comments

“Shape up or shape out” – DWP give small DC schemes one year’s notice


 It is not acceptable for savers to be enrolled in arrangements that do not deliver value in terms of costs, investment returns or secure and resilient governance. Government would expect trustees acting in the best interests of their members to take appropriate action to wind up and consolidate without TPR needing to exercise its powers.

This is how the DWP have responded to its 18 month long consultation on DC scheme consolidation. In case such schemes think they can spin this out for as long again, the DWP continue

It is proposed that these regulations will come into force on 5 October 2021.

Trustees will be required to assess their scheme for value for money on a basis prescribed by the Pensions Regulator. The consultation’s assumption is that most small DC schemes will fail their own assessment.

Trustees with failing assessments  can be given grace to improve but their homework will eventually be marked by the Pensions Regulator.

 If the trustees fail in this attempt to improve they will be expected to wind up the scheme and consolidate the members into a scheme that offers better value.

In case trustees are in doubt, the DWP end their summation

TPR has the power to issue an order to wind up the scheme, to remove trustees in certain circumstances, or to appoint new trustees to properly manage the scheme’s assets.

The Government has widened the scope of the schemes that concern them (previously schemes with less than £10m). It’s scope now includes all DC schemes with less than £100m that are more than 3 years old

A new Value for Money/Member assessment

Lurking behind this is a new and much tougher VFM test.  This is aligned to the proposals in FCA’s CP20/9 VFM policy statement and calls for the same three legged stool approach with the test focusing on returns , charges and ” governance and administration”. The FCA opt for “quality of service” instead of governance but a peek behind the curtain suggests that the terms amount to much the same. This is an unusual and most happy alignment between the Regulators.

The risk remains however that Trustees , IGCs and GAAs can continue to argue that in their opinion “their provider continues to offer value for money”. To mitigate the risk that the opinion is biased by a conflict in favor of self-survival, both regulators appear to be moving towards a quantitative assessment where opinion is based on evidence and evidence based on data and benchmarking.

This assessment is variously described as “new” and “more holistic” but it’s clear from the sub-text of the consultation that for occupational DC schemes with less than £100m in assets that have been going for more than three years life is going to get a lot tougher. That includes commercial master trusts, some of which will fall need to take the new assessment.

So what of the new assessment?

Reporting will be against net returns

The key new idea is that of a “net return”.

We agree that while costs and charges have a significant impact on member outcomes they are best understood in the broader context of what the scheme delivers. The net returns received is a crucial factor in measuring value for members

The net return of a scheme may be measured by the quoted performance less stated charges but the DWP seem to be pointing at the return experienced by members in “various age cohorts”. This suggests a move towards measuring returns experienced by members. The illustrations in the Statutory Guidance (published in annex E)explain how this will work and it looks very complicated and makes comparisons between schemes all but impoosible

As I’ve noted on this blog several times, it is not what fund managers and trustees report as their estimate but what members see in their pot values – that matters. This blog will continue to press for the full transparency of actual experienced returns and not a proxy created using assumptions rather than outcomes.

The DWP are suggesting that

 in order to provide greater transparency to members all relevant schemes, regardless of size, must publish net returns for their default and self-selected funds in the annual chair’s statement.

This suggests that net returns will become a common feature by which members, employers and fiduciaries can judge workplace pensions. I would suggest that they are also relevant to SIPPs and to value assessments from fund platforms.

Shortcomings of the net return approach

However, if we are to have proper transparency, we need to move beyond net returns and look at the internal or individual rates of return achieved by members. This is the only true way to measure the value a scheme can measure value delivered and it can be bench marked.

scheme dashboard showing average IRRs achieved against benchmarked IRRs – a simple way of comparing returns.

People are rightly concerned about whether they are getting value for money not at scheme level but in their pocket.  While we agree with the thrust of the consultation to use value for money to help schemes consolidation, trustees need to be looking at value for money experienced by individual members.

The only way to assess returns that does this is bottom up, by measuring scheme returns by averaging the individual returns. The Net Return approach does not do this, it assumes that everyone’s experience of funds is the same – it never is.

Reporting will be against governance and administrative metrics

measures of administration and governance include:

  • promptness and accuracy of financial transactions
  • appropriateness of default investment strategy
  • quality of investment governance
  • quality of record keeping
  • quality of communication with members
  • level of trustee knowledge, understanding and skills to run the scheme effectively
  • effectiveness of management of conflict of interest

Some of these metrics are easily measurable- (a study of internal rates of return will provide evidence of the quality of record keeping).

Excerpt from an AgeWage report showing suspect data items identified by anomalous IRRs

Others will rely on a finger in the air. How for instance can trustees measure the effectiveness with which they manage conflicts of interest without declaring a conflict? TKU similarly needs external measurement as does the quality of investment governance, but there are no authoritative independent agencies to establish good from bad. There is no standard, let alone a certified standard for any of these measures. As for the appropriateness of a default, what board of trustees is going to call itself for running an inappropriate default?

These are not matters that can be measured by net promoter scores from members of by trust pilot, attempts to provide DC schemes such as the PLSA’s Pension Quality Mark have struggled to gain acceptance for measures beyond the bar set for contribution rates.

The worry is that a liberal interpretation of value for these measures  will be used to justify value for members even where net returns are poor. The DWP  is cute in its observation.

The outcome should be a holistic one but made with regard to government’s statutory guidance

It is going to be important for TPR to take a strong hold on the term “holistic” and not allow consultants and lawyers to deflect focus on the main event – the outcome of pension saving in the member’s pocket.

Bench marking

As in the FCA’s CP20/9 , the purpose of the VFM assessment is not just to establish an absolute measure of VFM but to allow the trustees to see the scheme in the context of others. As with the FCA, the bench marking is proposed to set the scheme against comparison schemes that span the options available to employers when choosing a workplace pension.

41. For the purposes of the assessing costs and charges and net investment returns as part of the value for members assessment, each specified pension scheme must compare itself with three “comparison schemes”.7

42. We expect trustees to have a clear rationale for the schemes they have chosen as comparators. The comparators should include a scheme that is different in structure to their own, where possible. For example, bundled corporate pension schemes should look at an unbundled example, and pension schemes not used for Automatic Enrolment should not limit their comparison to other such schemes.

This will only work if the comparison are simple. Here is an example of net performance reporting from the Guidance.

In this example, the scheme applies different charges to different employers, meaning that returns may vary between employees. Trustees do not need to produce multiple tables of returns but can instead provide additional information for each group of employers. The example below shows a scheme with four groups of employers who are charged differently:

Table shows employees in Group A.
Employees in Group B: add 0.05% to returns
Employees in Group C: add 0.15%
Employees in Group D: add 0.20%

Annualised returns % (if available):

Age of member in 2021 (years) 20 years (2001 to 2021) 15 years (2006 to 2021) 10 years (2011 to 2021)
25 x.y % x.y % x.y %
35 x.y % x.y % x.y %
45 x.y % x.y % x.y %
55 x.y % x.y % x.y %
65 x.y % x.y % x.y %

Annualised returns % (expected):

Age of member in 2021 (years) 6 years (2015 to 2021) 5 years (2016 to 2021)
25 x.y % x.y %
35 x.y % x.y %
45 x.y % x.y %
55 x.y % x.y %
65 x.y % x.y %

Much the same can be said for costs and charges and indeed governance and administration. I will be strongly responding to the consultation to suggest ways of simplifying this reporting.

What is the DWP’s big picture?

The consolidation section of the consultation comprises only one chapter of a 6 chapter consultation with 7 annexes and 2 impact assessments. Small wonder it was 19 months in the making.

The other chapters mainly deal with the introduction of alternatives into DC funds which is seen by Government as a positive. Alternatives include private equity investments and investment into what is variously known as “patient capital”, “infrastructure” and “impact” investments. The Government argue that these forms of investment cannot exist within the defaults of small schemes and that consolidation can ensure that more members get exposure to new forms of growth (with the positive social impact they can bring).

The consultation uses the imperative of getting these investments into DC defaults to dismiss calls for a more inclusive charge cap. Indeed the consultation into the charge cap is summarily dealt with in chapter 5 of the consultation and annexes F and G.

It would be easy to read this consultation as a whole and consider the point of it no more than to placate certain asset managers who are excluded from DC investment. This would be to miss the bigger picture.

Of much more relevance to pension savers is that pensions produce good outcomes by making their money matter. The requirements for TCFD reporting look beyond all but the best funded and most committed trustees.

Better returns need to be allied to better investment and implemented through better governance. By linking consolidation with an extension of the impact of workplace DC investment, the DWP may have pulled off something of a coup. For once this reads as a joined up document and let’s hope that when the FCA reports on its VFM consultation, the messages are equally direct and aligned.

Something of a coup for Guy Opperman and the DWP


Posted in advice gap, age wage, DWP, pensions, Pensions Regulator | Tagged , , , , , , | 1 Comment

Weathering the Storm

Iain Clacher & Con Keating

As part of our Funding Code research, we searched for academic or practitioner papers covering long-term expected returns forecasts. We were particularly interested in the ex post accuracy of these forecasts. We found none which used historic market performance[i] other than for short-term concerns such as corrections to market bubbles and periods of boom and bust. There were a few, macro-economic in nature, where long-term returns are functions of growth and demographics. To use an analogy, this is climatology rather than weather forecasting. We shall revert to this later.

What we do know

There are a few things we do know about gilt yields – they are strongly predictive of future long-term gilt returns, but that relation is tautological. They are not predictive of equity, property, or other asset class returns at any holding period horizon. This renders their use in gilts + presentation of expected returns highly questionable. To misquote Ralph Nader, they are unsafe at any horizon.[ii]

We have spent much of the past week trying to reconcile various claims and figures cited in the latest USS valuation consultation with UUK as these two things seem inextricably linked. We have had little success.

As best we can tell, the single equivalent discount rate for USS would be less than 2% nominal and the required rate of return on scheme assets would be around 3.2% nominal. These seem to us to be low and readily achievable. With that in mind, we looked to the long-term expected returns forecasts of other long-term financial institutions. The expected returns of other UK pension funds are not a valid comparator as they are subject to the same regulatory panopticon.

Looking further afield, The Norwegian Fund for Future Generations publishes its expected returns – they expect 3% real above their CPI which has averaged around 1.75% in recent decades, so a nominal of around 4.75%. The risk (volatility) of their portfolio is 12%. The most interesting aspect of all of this is that in 2017, in response to declining government bonds yields globally, they moved their target asset allocation from 60/40 equity/bonds to 70/30 equity/bonds and increased the expected return to 3% real from 2.75%. In the context of this shift in investment strategy and return expectations, it is worth bearing in mind this is the largest of the sovereign wealth funds (with circa $1.2 trillion of investments as of July 2020)[iii]. This is a fund that has access to the best advice in the world. Moreover, it has  achieved these types of returns over the long-term[iv].

By our calculation, if USS were to use this rate, it would not be reporting any deficit but rather a surplus of similar order to the headline-grabbing £18 billion deficit.

Intergenerational fairness

This issue of what do future returns look like (and what returns do we need) is also linked to the recent blogs on cash equivalent transfer values.

If we fund a scheme to the levels of liabilities arising from low rates of interest, we are effectively pre-funding those liabilities relative to their contractual values. This also has the effect of lowering the required rate of return on the asset portfolio, and with that, the potential future cost to the sponsor employer. If a scheme is fully funded at this rate, the required rate of return on assets is that rate.

In these circumstances, if a member takes a transfer based on these values, albeit that the transfer may be limited to the degree of funding of the scheme, then it is crystalizing the employer’s cost to that date. Crucially, this transfer enables the employee to extract all of the pre-funding, and denys the employer the possibility of recouping the costs of this prepayment,  as any future outperformance of the asset portfolio relative to this low return, is no longer possible on the assets that have been removed from the scheme.

While it may be the case that transfer transactions throw up gains in accounting terms when those accounting liability values are inflated by the use of low gilt rates, but that is a short-term accounting gain, which comes at the expense of longer-term real gains from higher returns than those we currently observe in the market.

Moving to a gilts-based de-risking strategy has the same effect of crystalising the elevated sponsor costs while removing any possibility of recouping them.

Another comparator

It is worth comparing these transfers with the size of the PPF; at £80 billion they are four time the liabilities of the PPF, and  in reality, the PPF is rather small relative to the overall DB pensions marketplace. In its 15 years of existence, it has assisted just 2% of scheme members and less than 1.5% if measured by liabilities, and it has done so at eye-watering cost. It is apparent that the fear of sponsor insolvency greatly exaggerates the actuality.

The Funding Code consultation makes much of protecting members. This raises the question of just how much of members’ pensions is at risk. The answer is rather little. If we consider the scheme we used in illustrations in earlier blogs, we have 63% as pensioners in payment and 37% deferred. The pensioners in payment are fully covered by the PPF so the risk exposure is limited to the 10% haircut applied by the PPF – so just 3.7% of future pension payments. These have a total future value of just £756k – a small fraction of even the minimal present-day funding cost of the proposed code. It is not difficult to conclude that this funding code strategy is more about protecting the PPF than members.

A final thought

The ‘lower for longer’ view of interest rates is now conventional wisdom. As such, it and its associated returns expectations are suspect. The shifting global demographics imply that we are moving over the coming three decades from the deflationary environment of the past three decades to one in which inflation and higher interest rates will prevail and with that low growth. This unconventional view is explored fully and coherently in Charles Goodhart’s latest book, ‘The Great Demographic Reversal’; we recommend reading it. This is a change in the financial climate that is perhaps as important as the change in the natural climate.

One consequence of that would be that this is surely the wrong time to de-risk in the manner proposed in the DB Funding Code.


In the brief time since we wrote this blog, we have had some very productive discussions with some of our peers. Our attention was drawn to the Canada Pension Plan which publishes 75 year return expectations for each of its two funds. These are 5.95 % (CPI + 3.95%) for the ‘Base’ fund and 5.38% (CPI + 3.38%) for the more conservatively allocated ‘Additional’ fund. Obviously, it is too soon to evaluate the accuracy of these forecasts but the indications to date are supportive. It is notable that both CPP and the Norwegian employ peer review of their assumptions. We feel that the Pensions Regulator’s prescriptions should be subject to similar peer review.

It has also been pointed out to us that the large Canadian funds have proved able to harvest ‘illiquity premiums’ very successfully, with which we agree. However, we will make just one point here, though we will return to the subject in our commentary on the proposed second Code consultation. That point is that it is liquidity in the sense of tradability which has a cost rather liquidity which receives some extra compensation. The means that if you buy liquid securities you pay this cost regardless of whether you exercise the option to use it by selling in a market. Gilts, of course, are the most liquid and most expensive of securities from this perspective. One of the effects of quantitative easing is to lower the cost of liquidity, though relative value differences should persist between on and off the run securities should persist, This lowering of the cost of liquidity should also result in a greater reluctance by dealers to hold large inventories of bonds in pursuit of their liquidity provision role – the returns to capital are less attractive.

Finally, we have had much commentary on the prudence of buying gilts at times when their expected returns are negative in real terms[v]. However, as we have been promised a definition of prudence by the Regulator in the second consultation, we shall leave further discussion until that point in time.

[i] The long-term memory literature results for UK markets are mixed.

[ii] The original comes from Unsafe at Any Speed, Ralph Nader, 1965.

[iii] https://www.statista.com/statistics/276617/sovereign-wealth-funds-worldwide-based-on-assets-under-management/

[iv] Those interested in more detail should read their White Paper (in Norwegian) available at:


[v] For more on this aspect see:  https://www.bankofengland.co.uk/statistics/yield-curves



Posted in actuaries, advice gap, age wage, pension genome, pensions, risk | Tagged , , , , , | 2 Comments

Payroll + Pensions = Value for money! Register here for the event of next week



This is going to be by far and away the best webinar you could watch next week


Hosted with our thanks by the CIPP


For a sneak peak of payroll’s best kept secret – click here

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I love payroll and payroll loves me, don’t mind liaising with HMRC


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Savers are denied the right to check their pension statements

Although it feels like winning, this has been a tough few weeks for me and my team as we struggle to get nearly 600 Data Requests sent to pension providers. These have been entrusted to us  via Letters of Authority signed digitally.

What we’re asking for is the history of pension contributions made for and on behalf of the 300 testers in the FCA sandbox using agewage.com. We are also asking for the current pot value (AKA the net asset value).

Why we want this information is to show each of our 300 users their individual (or internal) rate of return on their savings- their IRR. We also give them a score and an idea of how they’ve fared against the average saver (paying in the same amount).

You would not think that in this age of the GDPR, getting data on what you’ve paid in would be hard , but it’s been a nightmare and these are the top ten reasons pension plan administrators have given us for not complying with our user’s legitimate request.

  1. “AgeWage is not registered with the FCA” (we have direct authorization)

  2. “We don’t recognise digital signatures” (this is against the Law Commission’s judgement)

  3. “We only go back two years” (even if the contribution goes back two decades)

  4. “We don’t have all the data in one place” (split records)

  5. “We haven’t completed due diligence on Agewage.com”

  6. “AgeWage hasn’t verified our client”

  7. Some data supplied but contributions found to be missing

  8. “We will only send you the NAV” Supplied with a wake up pack,

  9. “We don’t provide this information to our clients”

  10. “We are not participating in your test”.

What this means is that despite hanging on to phone lines for upwards of 30 minutes, we are simply unable to analyse an individual user’s data because of ignorance or incompetence or willful obstruction.

The result is that many of our users have faced lengthy delays getting their scores and a substantial minority (around 15%) face the prospect of not getting their data analysed.

Put more simply – savers are being denied the right to check their pension statements and stopped from getting to know their pension,

What this says about governance

Go back to the message from Jerry Schlicter at the top of this blog and then think about why investors on both sides of the Atlantic have a legal right under Erisa and GDPR to their data.

If we do not have access to our contribution histories we cannot tell if the money we have sent to the provider has been recorded and invested.

AgeWage has analysed over one million pension pots in the UK and we estimate around 2.5% of the records we’ve been sent are wrong. So for every 1000 pots – 25 look wrong.

We can tell they look wrong because the rates of return on pots looks highly unlikely.

We provide reports to trustees, IGCs , GAAs  and the administrators of SIPPs , heritage pensions and occupational schemes. We show them records that look wrong and highlight our diagnosis.

We are also highlighting what look erroneous records to those in the FCA test. And we will be explaining to our testers, the FCA, the trustees, IGCs and GAAs where we are being denied the data needed to analyse whether our testers have accurate records.

We are told that we are being disruptive. We push back. We are offering people a service that tells them whether they have a regular or abnormal IRR.

But we says that this shows the governance on record keeping within non-compliant organisations is weak to very weak. Customers are being denied their data to which they have a right under GDPR, they are not being treated fairly for their legitimate data requests and they are certainly not getting any quality of service.

Fiduciaries faced with these failings from their customer service teams are under an obligation to respond. As our testers agent, AgeWage will pursue these data requests by escalating to fiduciaries – where we cannot get the data in a timely and accurate way.

So what of Jerry Schlichter?

You can read of Jerry Schlichter here.  Robin Powell’s fine article explains how this man has forced plan administrators to buck their ideas up in the United States.

In the UK we do not rely on class actions to change things. Instead we rely on principle based legislation such as the FCA’s “Treat Customers Fairly”. Where customers aren’t treated fairly we have IGCs and GAAs and Trustees to escalate matters to. And there are ways to escalate beyond through the consultations put out by Government.

This message was sent to me by Jerry Schlichter yesterday

Denying people the right to see how their pension has done, denying them the right to check whether their records have been kept accurately, is a fundamental breach of any customer code. It is a breach of GDPR and it shows those organisations who fail to provide data, their readiness to participate in the pensions dashboard.

I am not naming or shaming, but I am putting those organisations who are refusing to co-operate and meet the client’s legitimate requests that we will escalate so far as we can. That is a long way.

Here is an email I received from one of the people who has been working with us (unpaid) to get the backlog of data requests sorted. I have redacted the provider but will be forwarding the mail to the life company in question.

Today was an “insurance company” day: 16 open items; eight phone calls (max wait 32mins) to 7 different departments; 7 LOAs resent. Result: 3 sets of data received (one still incomplete) and one policy not found.

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The best friend investors have never heard of (Robin Powell)


Jerry Schlichter

He’s arguably done more to advance the cause of ordinary investors than anyone except the late Jack Bogle. And the chances are you’ve probably never heard of him.

His name is Jerry Schlichter, and he’s the founding and managing partner of the St Louis-based law firm Schlichter Bogard & Denton. In recent years, Schlichter and his colleagues have won compensation valued at more than $1.5 billion on behalf of individuals harmed by financial wrongdoing.

His specific focus is on the excessive fees charged by Wall Street firms for managing large company pension schemes. He’s sued both the fund trustees and, in some case, the fund managers themselves, and his success rate is extraordinary.


My colleagues and I at the Transparency Task Force had the privilege of listening to a talk by Jerry on Tuesday evening. It was truly inspirational.   

The key moment in his career, Jerry explained, came in 2006, when he filed a lawsuit against the Swiss-Swedish multinational corporation ABB and Fidelity Investments on behalf of ABB pension plan members.

“We needed a huge line of credit,” he recalled. “My partners and I put our houses and net worth — everything — on the line.

“The firms said to us, ‘We don’t care how much we pay. We will put your firm out of business.’ We later learned that they had spent $42 million to pay their lawyers alone. Even senior judges encouraged us to give up.

“Losing that first case would have been disastrous. It would have meant bankruptcy for me and my two partners.

“But we won, and that began to turn the ship around.”

“Significant, national contribution”

ABB refused to settle and launched multiple appeals but finally backed down last year, after a twelve-and-a-half years battle.

The U.S. District Court in the case acknowledged “the significant, national contribution” made by Schlichter and his team. It said they had “educated plan administrators, the Department of Labor, the courts and retirement plan participants” about the fiduciary obligations of 401(k) plan administrators.

Schlichter has also won cases against some of the biggest firms in America, including Boeing, Lockheed Martin, Caterpillar and Kraft Foods.

The New York Times has referred to him as “Lone Ranger of 401(k)s”. Investment News called him “public enemy number 1 for 401(k) profiteers”, Chief Investment Officer described him as “the industry’s most feared attorney”.

“Asleep at the switch”

So, why does Schlichter think trustees have failed to spot bad advice? And why didn’t they question the fees being charged?

In most of the cases he has been involved in, he says, they were simply “asleep at the switch”.

“The trustees are typically human resources people,” he said. “We saw cases where they would set a meeting for 4.30 on a Friday afternoon. Everybody was checking their watch to get out of there.

“There wasn’t any scrutiny because there was no financial incentive. The people on the committee aren’t paid for what they do, and a company’s bottom line is not affect by the performance of the plan. All that risk is on the employee and the retiree.

“So it was opaque. People were asleep at the switch, not caring particularly.

“The US financial services industry figured out that there was an explosion of assets — $5 trillion now in defined contribution plans — and jumped into that space.

“The problem is (the fund managers) are not fiduciaries. So they come in and market their own products, and say, ‘Hey, we’ve got great mutual funds, put those in your plan, and by the way we’ll take you out to dinner or give you some baseball or football tickets if you do this.’

“Nobody’s minding the store. The fund managers want to make as much money as they can. The fiduciaries need to control them, and they don’t.”

Blatant self-dealing

In a minority of cases, Schlichter said, his firm has presented evidence of self-dealing — in other words, trustees taking advantage of their position and acting in their own personal interests rather than the interests of employees and retirees.

“I’ll give you an example. In the ABB case, Fidelity came in and said, ‘How would you like to have a free plan?’ So what they did was, they used Fidelity for their own executives’ pension plan, their payroll processing, and health and welfare plan — all of which were furnished at a loss to Fidelity.

“Meanwhile, on the 401k plan, Fidelity were getting more than a 50% profit. So what we had was the employees subsidising their employers’ expenses through their own retirement expenses — a blatant example of self-dealing.”

Enormous financial abuse

Asked whether we will now see similar cases in the UK and other countries, Schlichter predicted we will.

“There is enormous financial abuse going on in all forms and in all countries,” he said.

“This is the most profitable industry in the world. The more opaque and under-the-radar the financial transactions are, the more people will operate to serve their own financial interest.

“You’ve got these massive institutions with massive marketing and prospectuses that are 50 pages long that nobody reads.

“Investors end up feeling they don’t have a voice, they don’t have control, they don’t understand things, and they don’t know where to go with it.

“That’s why people came to us. And it seems to me the same thing is going on in the UK.”

Group actions

One potential obstacle to litigation in the UK is that US-style class actions are are not permitted here.

In a class action, a lawsuit can be filed by an individual acting on behalf of a group of plaintiffs. In the UK we have group actions, which involves having to obtain the consent of affected individuals.

This can be a protracted process, and partly explains why the group actions against parties involved in the Neil Woodford scandal have not yet come to court.

Watch this space

That said, I have little doubt that we will see legal action against UK fund trustees and asset managers over excessive fees in company pension schemes within the next few years.

It really shouldn’t be necessary to resort to litigation to protect the interests of pension fund members. But, in the US, that’s what it took to open people’s eyes to the abuses taking place.

The Wall Street Journal once referred to the 401(k) industry as having been “Schlichterized”.

UK pensions could do with some Schlichterizing too.

This article is taken from the Evidenced Based Investor’s website  #TEBI website. You can read the original here.  I was at that TTF session and thought to write this article. I am glad I didn’t try- you can’t beat a professional and thanks to Robin and Jerry, we have the essence of the evening.

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Wine, lizards and the hazards of the mute button – Covid-19 actuaries Friday report

The Friday Report – Issue 21

By Nicola Oliver, Matthew Fletcher and John Roberts

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

COVID-19 is still one of the hottest topics for scientific papers and articles. The COVID‑19 Actuaries Response Group will provide you with a regular Friday update with a curated list of the key papers and articles that we’ve looked at recently.


Reproduction number (R) and growth rate (r) of the COVID-19 epidemic in the UK: methods of estimation, data sources, causes of heterogeneity, and use as a guide in policy formation (link)

This paper from the Royal Society is a deep dive into approaches used to estimate the key epidemiological parameters R (the reproduction number) and r (the epidemic growth rate). It investigates the main UK models used to inform the UK Government, including data sources used and assumptions made – for example in relation to the time between onset of symptoms and hospital admission and death. The report also looks at parameters that could be employed to assess the impact of implementing and relaxing social distancing and other non-clinical measures used to combat the pandemic.

It concludes that, whilst wide bounds of uncertainty surround estimates of both R and r, they are still valuable to help formulate policy as guidance on a central estimate of these key figures is preferable to guessing them. The authors consider that the key improvements that can be made when estimating epidemiological parameters are clarity on the assumptions made and improving data quality.

Clinical and Medical News

T-Cell[1] Response

Evidence supporting a role for T cells in COVID-19 protection and pathogenesis is currently incomplete and sometimes conflicting. This study examined overall and immunodominant SARS-CoV-2-specific memory T cell responses in patients who had recovered from COVID-19. A total of 42 individuals were recruited following recovery from COVID-19, including 28 mild cases and 14 severe cases.

SARS-CoV-2-specific CD4+ and CD8+ T cell responses were seen in the majority of convalescent patients, with significantly larger overall T cell responses in those who had severe compared with mild disease. In addition this study reports that the proportion of the T cell response that is attributable to CD8+ (rather than CD4+) T cells is increased in mild infections; this may indicate a protective role for SARS-CoV-2-specific CD8+ T cells.

Another useful output of this study is the identification of several parts of the virus that are targeted in a cross-reactive way (i.e. immune response from a different prior corona virus) in up to half of the patients tested; this could prove useful for future immunology studies and for consideration in vaccine design.

What is the evidence for physical distancing in COVID-19?

Trisha Greenhalgh and colleagues provide a review of the evidence for physical distancing in COVID-19. The so-called ‘2 metre’ rule to prevent transmission by droplets originated from research dating back as far as 1897; this has remained the accepted distancing rule despite updated evidence suggesting that droplets can spread beyond 2 metres.

Key considerations are droplet size, force of emission, ventilation, exposure time, and crowding levels.

The figure below displays the risk of SARS-CoV-2 transmission from asymptomatic people in different settings and for different occupation times, venting, and crowding levels.

The researchers suggest that rules on distancing should reflect the multiple factors that affect risk, including ventilation, occupancy, and exposure time.

Clinical risk scores & vital signs

Clinical risk scores are used in a variety of clinical settings in order to aid decision making by medical personnel. For example, APACHE II was designed to provide a morbidity score for patients in ICU. It is useful to decide what kind of treatment or medicine is given.

Two risk scores have been developed to help with management of patients with COVID-19. The first, the 4C mortality score, was developed in order to predict mortality given that the symptoms and clinical course of COVID-19 are significantly different to other severe respiratory infections.

The researchers focused on eight metrics that play a key role in determining mortality risk – age, sex, number of underlying conditions, respiratory rate, blood oxygen concentration, level of consciousness, urea, and C-reactive protein – giving a final score out of 21. Patients with a score of at least 15 had a 62% mortality compared with 1% mortality for those with a score of 3 or less.

In addition, researchers based in Italy have identified the most appropriate risk score that can be used to predict intensive care unit admission and death for COVID-19 patients in the emergency department. Their comparative  analysis showed that in COVID-19 patients NEWS[2] and REMS[3] used on arrival at the emergency department were the most accurate scores for predicting the risk of ICU admission and death, respectively, both at 48 h and at 7 days.

Adding insights to the clinical course of COVID-19 is this analysis, which identified those vital signs which are associated with deterioration in COVID-19 patients. Patients with COVID-19 were found to deteriorate more rapidly than those with other viral pneumonias, with progressively lower oxygen saturations, greater oxygen requirements and only minor abnormalities in other vital signs.

Pause in the Oxford vaccine trial

It has been widely reported by the media that the AstraZeneca Oxford coronavirus vaccine, AZD1222, has been temporarily paused due to an unexplained illness in one of the participants. This press release from AstraZeneca states that this is a routine action which has to happen whenever there is a potentially unexplained illness in one of the trials, while it is investigated. This is not unusual during any clinical trial.

It has also been reported, though not confirmed, that the individual concerned has developed transverse myelitis, a condition in which the messages that the spinal cord nerves send throughout the body are interrupted due to inflammation of both sides of one section of the spinal cord.


ONS Infection Survey

After several weeks when the weekly survey link has reported low and stable levels of infectivity, with relatively few positive tests meaning it was difficult to draw any meaningful statistical conclusion from the results, today’s report strikes a noticeably different tone.

It reports a marked increase in the rate of positivity to 1 in 1,400 members of the community (previously it was around previously it was 1 in 2,000, with the growth in new infections now clear. ONS estimates around 3,200 new infections per day in England. Looking at variations by age and region it is perhaps no surprise to see that infections are growing rapidly in the 17 to 34 age bands, and that the North West is highest in terms of growth.

“R” updates

Also published as usual on a Friday is SAGE’s estimate of R, which is now put at 1.0 to 1.2 across the UK. Simultaneously, the government also published the latest REACT study by Imperial College link which assesses that infectivity has been doubling every 7 to 8 days since Aug 22nd, and puts R at 1.7 (range 1.4 to 2.0). The sample size over this latest period was 150,000.

The difference can be explained by the caveat in the SAGE release that it represents transmission over the last few weeks, whereas the Imperial College survey appears more up to date, and so is picking up the sharp increase we have seen in other metrics recently. However, it is to be hoped that the confusion caused by two markedly differing results being published by the government on the same day does not undermine public confidence in the quality of statistics that are reported.

World Health Organization: Coronavirus disease (COVID-19) Weekly Epidemiological Update and Weekly Operational Update

Since August, the World Health Organization (WHO) have published weekly epidemiological and operational updates setting out the state of the pandemic across the world. The repository is here; the latest reports are here (epidemiological) and here (operational).

The epidemiological report sets out that globally, over 1.8 million new cases and 37,000 new deaths were reported for the week ending 6 September – an increase in cases and a decrease in deaths compared to the previous week. The Americas accounted for almost half of all new cases reported in the week, with the USA and Brazil representing almost three quarters of all cases in the region. New cases in Europe have increased substantially since a low point at the end of May, but deaths remain at a low level. India have reported around 85,000 cases a day for the past week and both cases and deaths in the South-East Asia region continue to increase rapidly.

The operational report looks at field reports of efforts to counter in various different countries, summarises the numbers of WHO-procured items (testing and PPE) in different parts of the world, and reports on the state of preparedness across the globe.

And finally …

Wine, lizards and the hazards of the mute button

Parents and carers who have been home schooling during lockdown could no doubt share many stories, both positive and negative. Some of these reflections are compiled here; take a moment to appreciate the challenges of home schooling, and the positive impact on the wine industry!



[1] T cells are one of the major components of the adaptive immune system. Their roles include directly killing infected host cells, activating other immune cells, producing cytokines and regulating the immune response.

[2] National Early Warning Score (NEWS) is a tool developed by the Royal College of Physicians which improves the detection and response to clinical deterioration in adult patients and is a key element of patient safety

[3] Rapid Emergency Medicine Score (REMS) is an attenuated version of the Acute Physiology and Chronic Health Evaluation (APACHE) II score and has utility in predicting mortality in non-surgical patients



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Balance sheet relief leads to later life grief?

It’s a shame for my loyal readers (Con Keating especially) that some of the most interesting comments on my blog are made on twitter and linked in. In yesterday’s blog I suggested that our former pensions minister, Steve Webb, was using the skills that won him “Spectator Minister of the year” in 2014;- specifically he was justifying pension atrocities in the name of freedom – specifically pension freedoms!

I am not alone in calling this

This may all seem a little arcane but there is substance in this discourse that informs on a wider debate about whether defined  benefit pension schemes are a help or a hindrance.

Those arguing for de-risking see DB schemes as a corporate hindrance, shackling executives to low bonuses, shareholders to low dividends and the enterprise to low investment in its future.

Those taking the opposite position consider pensions promises that should be honored and not shipped out (along with all manner of risks) to be floated on choppy markets.

Having worked in a DB consultancy for 10 years I know of many consultants who have openly sold DB de-risking (aka the facilitation of transfers) as a means to give the corporate balance sheet immediate relief as individual transfers invariably cost less than the imputed balance sheet item of a “deferred pension”.

This argument is then stretched by suggesting that de-risking is strengthening the employer covenant, reducing the risk of the scheme going into the PPF and that transferring members are in fact doing remaining members a point. Believers in the old adage “if it looks too good to be true , it probably is” should be gulping for air at this point.

Providing a DB cash equivalent transfer value at the discount rates that result from the dash to buy-out/self sufficiency means paying a much higher price to de-risk than would be the case for  open schemes. Proposals from tPR to force schemes into low-risk funds are likely to increase pension transfers still further.

There is a much clearer link to increased transfer activity and increasing transfer values than member desire to exercise pension freedoms.

Witness the British Steel Pension Scheme which reported virtually no transfers in the years following the announcement of the freedoms  leading up to the announcement of the RAA in 2017.

On the basis of this information , the trustees believed that steelworkers were (even with the temptation of pension freedoms) were supine and fans of scheme pensions. I was told that this was the prime driver for the complacency that was identified in the Rookes report.

But early in 2017, the scheme – determined it would lock down its investment strategy , the Trustees shifted the investment of the scheme from growth to defensive assets. They abandoned an age-banded  discount rate to a  much lower flat rate  The result was that some transfers nearly doubled, something that would have been foreseen by the employer’s actuaries and something that led to one of the largest mass-exoduses in British pension history.

I am not saying that the consultants to Tata purposefully encouraged the transfers or that the Trustees were complicit, but I am saying that they created the conditions for £3.2bn to leave the scheme to sit in a wide range of SIPPs, some – none too savoury.

Balance sheet relief or later life grief?

A point that is made too rarely is that we really don’t know what will happen to the £80 bn that flowed out of DB schemes between 2015 and 2018. Will it be used to replicate the defined benefit with former members buying escalating annuities and spouses pensions? Or will the money find other investment pathways – from Lamborghini to wealth preservation scheme?

I think it almost inevitable that a high proportion of the proceeds of these CETVs will find its way into the pockets of intermediaries and I see absolutely no argument to suggest that taking their transfers was the “no-brainer” that several welsh steel-makers believed them to be.

In all probability, a high number of people who took transfers will draw down too hard, from pots denuded  by high charges and the money will run out before they do. We will not know this till the money starts running out, but expect in future decades to find a different debate about transfers.

In one corner will be steelworkers being paid a pension (probably by an insurance company as New BSPS looks headed for buy-out).

In the other corner will be those who have taken transfers. Some will feel winners but many won’t. This is what the FCA are thinking about when they question the basis of so many of these transfers.

This is what I mean when I say that employers and trustees must be aware that “balance sheet relief risks later life grief”.


This and my previous blog result from a webinar laid on by LCP and Royal London. These webinars are free – but we know that in this naughty world, very little is for free. The price of attending a webinar in these times is to listen and tacitly consent to the approach being taken.

There is here a worry that those with the capacity to host these events are now so powerful that they can dictate the way things are. So I ask…

Are consultants using webinars to create an oligarchal agenda?

I do not point Zola’s “J’accuse” at pension consultancy. It is true that they are paid by employers (directly or indirectly) and are keen to play to the employer’s agenda.

It is also true that the PPF, as much as any other superfund, poses an existential threat to consultancy earnings , once a scheme slips into it.

But that does not mean all consultants are compromised. First Actuarial’s response to the Pension Regulator’s proposals to the DB funding code shows that consultants can deliver non-hysterical messaging about the PPF and encourage diversity of strategy beyond the one size fits all dash to self-sufficiency.

Lane Clark and Peacock (LCP) where Steve Webb is a partner is a firm, like First Actuarial , with the interests of members at heart and I know that Steve Webb has ordinary people’s interests at heart!

Or can delegates re-create debate?

One trouble with these webinars that we get in is that the dissenting voice finds itself difficult to be heard. The debate recorded earlier this week was such a case with two good speakers arguing not in a dialectic , but to reinforce each other’s views. We are left with a largely muted audience to give tacit assent to the views being expressed.

There can be few more frightening examples of group-think than a webinar without dissent!

Credit LCP for letting me in and credit them for allowing the debate. I have been told on many occasions my questions are unwelcome to the host!

As with consultations, so with webinars – it is essential that we do not allow the conditions under which we live and work – to prevent a reasoned debate.



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