LCP report on how we’d be retiring if CDC had been around since World War 2

Posted on May 16, 2026 by henry tapper

LCP have done some work on this question.

The link to the full report is here.

What is so different about CDC?

It’s the first question that we got from large employers their and unions and it’s the message that needs to get to smaller businesses who do not have unions but are looking for better ways to pay people. For CDC is a better way to pay people a wage for life when they are ready to or have to retire.

People are pretty straightforward about what they want. If they put money away when they are young , they want to know they will be looked after when they get to the end of their careers whether that be  lowly or highly paid, people’s expectation is that the wage for life will replace the income they had when they worked.

LCP have a posh phrase for the rate that a pension replaces how much people were paid. They call it the “replacement ratio” and there latest work asks the simple question, how well would our two main pension systems , Defined Contribution and Defined Benefit have done over the last 80 years since Britain came out of war and back to normal life.

What LCP find for CDC vs DC vs DB. This is what 80 years of data tells them

Ivan, Laun and Helen use their data skills  to model what would have happened if CDC had been around from WW II  till today.

Across all periods considered, well-designed CDC schemes prove resilient to radically different market conditions. In our modelling, CDC outperformed individual DC with annuity purchase in every period tested. This is not because CDC eliminates risk, but because of how risk is shared and managed within the scheme.

In particular, CDC benefits from three structural features:

  • Sustained exposure to growth assets, allowing members to participate in long-term equity returns without being forced to crystallise losses at retirement

  • Intergenerational risk sharing, which smooths the impact of sharp changes in yields and market conditions

  • Adjustable indexation, enabling the scheme to absorb short-term volatility while still capturing upside when markets recover

This what we explain to large employers and unions  who are keen to listen. The reason that CDC matters is that it gives  more wages in retirement  than people can save for on their own.

Here is LCP’s key finding, based on data crunching. If you want to see all the assumptions that they’ve used then you can go directly to the report .

But this chart makes it clear that over the past 83 years since 1943, people would have got a better wage in retirement from CDC than they’d have got from DC or DB pension systems.

No matter what is going on with the economy and with the way the City reacts to it, CDC can deliver pensions in a way that DB couldn’t and DC does but not so well.

Where an employer is prepared to stand behind a DB plan , DB has provided a better replacement income most of the time I have been alive (since 1963 in these models). Only in the last 20 years has CDC done better. We’ll come to that in a better but I think it fair to say that for the employee, a DB pension was, is and for the lucky few – will be , the gold plated pension that they get in retirement.

This is LCP’s second headline and we can understand it by thinking of what Martin Lewis said on his show recently, if we have more than five years to invest, then investing into shares is better for you than saving. I know it sounds ludicrous since these pensions are all designed to pay out for on average 25 years but a lot of what goes on within DC and DB plans is what Martin Lewis calls savings. Only in CDC is an investment for ever.

From this , I think it is clear that for employers, unions and most of all the people  these organisations look after through workplace pensions, CDC does particularly well for those who are in CDC for the whole of their life. If you join CDC at 40 you will do well but it is over the last 20 years that CDC would really have helped the younger saver. This takes some explaining but it’s vital for all those I’ve mentioned to understand what LCP is saying so I’ll quote them

In all time-periods the younger member accrues a significantly higher pension than the older member. This is primarily due to accrual being cheaper for younger members because they have a longer horizon.

This is not as simple as it sounds. There is much you can read if you go into the report and I urge you to. But take it from LCP who have no skin in the CDC game (they are not providing a CDC scheme as “proprietor”).

Finally, CDC does something that is remarkable – paying inflation linked pensions

If you take the level black dotted line as the inflation linked pension, the one that you and me would call our expectation for wage increases, you can see that apart from the period when growth didn’t keep up with inflation (it’s called stagflation), CDC has beaten inflation giving ordinary people a pension that goes up in real terms (beating inflation).

We’ve only just done that in the past 20 years but as the first chart (at the top) shows, DC has done particularly badly in providing income recently.

LCP’s message is one that I was brought up with, that collectively we do better than if we try to do it ourselves. Of course there are clever people who make more from money than most of us can ever dream of and LCP acknowledge that some firms will not want to offer a collective solution, but I suspect that there are very few large firms that would pay more in retirement using CDC than through DC. Since most large employers have given up on DB it seems the best they can do.

LCP speaks to us as actuaries do but if you’ve got this far you will probably understand them

Relative to individual DC with annuity purchase, CDC avoids locking in poor outcomes at a single point in time and allows members to continue participating in long-term growth during retirement. Compared with purely individual arrangements, it spreads the impact of adverse market conditions across members and over time, reducing the severity of poor timing for any one cohort.

Of course they hedge their bets as I did , by offering employers an argument to continue in DC

These features come with trade-offs. Outcomes within CDC vary by age and market experience, and pensions in payment may fluctuate in real terms. Whether this is viewed as desirable depends on how fairness is defined: as individual ownership of outcomes, or as collective sharing of risk.

I spend a lot of time with Terry Pullinger who teaches me plain speaking. In plain speaking LC are saying that if you want people to own their own pot and take their chances, DC may be better, but if you want people to share the bad times and the good but generally to get more, then CDC is the type of workplace pension for you. That goes for whether you are reading as an employer, a member’s representative or potential member of a CDC.

 

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Shootout at the Inflation Corral with Dr Lacy Hunt

Posted on May 16, 2026 by henry tapper

Dr Lacy Hunt

By John Mauldin | May 16, 2026

Shootout at the Inflation Corral
I Felt the Earth Move under My Feet

In one sense, focusing just on inflation will be frustrating because there are so many data points that figure into inflation and inflation then reflects back upon them. I truly, viscerally, get that you are going to want to try to tie together unemployment and interest rates and markets and so forth. After 26 years, I can hear your questions in my head when I say something about inflation and you want to ask, “what does that mean for employment or interest rates or…?”

Perfectly on target questions. The problem is space. I really do try to hold this letter to about 3000 words. We will get to interest rates/Fed policy, employment, markets as well as geopolitics and technology in later letters. You can’t cover it all in one letter.

First, let me remind everyone we have transcripts from every session. It’s not quite the same as being there live, but it’s awfully close. You can get the transcripts and slides at this link. If you haven’t participated in SIC otherwise, this is the way to do it.

Now let’s talk about inflation.

I Felt the Earth Move under My Feet

I think everyone knows that Dr. Lacy Hunt has been a bond bull for 44 years. He turned bullish on bonds as Paul Volcker started raising rates in the early 80s and has stuck to it over time and it is up until recently been the right call. The funds he managed at Hoisington have been the top performing funds off and on for decades. Not so much in the last few years.

Lacy is a dear friend and mentor, but I must admit since I was part of the Q&A process, I was prepping to push him on his belief that long-term rates would go down. It seemed to me that things were changing. You don’t challenge Lacy unless you have your thoughts in serious order. Even if you are right, his logic will make you think you are wrong.

So… 30 minutes before the presentation, I get a note from Lacy basically saying, “I just want you to know that I am going to be making the case for a rise in long-term interest rates.” That started some internal text messaging with my team because this was not on my bingo card. A major 180° change after 44 years? He had two basic reasons, one that everyone is aware of (the oil price shock) and the other was a significant problematic change in Fed policy. When Lacy Hunt starts talking about higher long-term interest rates you have to pay attention. Let’s start with oil first.

By Lacy Hunt’s math, oil prices directly and indirectly account for roughly 12–15% of CPI. If oil prices settle even 20% higher than pre-war levels after the Strait eventually reopens—and I have no particular reason to question Lacy’s arithmetic—that alone could add roughly 240–300 basis points to the price level. Our price shocks have had significant negative effects on the economy:

Oil price shocks have been associated with recessions and bear markets in the past. This is not predictive, but it does warrant our paying attention. Energy is the main driver of our economy. We convert energy into everything. And oil is a big part of that energy equation.

That inflation pressure is not insignificant, to say the least. Of course, that’s before demand destruction even enters the equation.  But the oil shock didn’t arrive in an otherwise clean system. And therein lies the rub…

Starting in mid-December, the Jerome Powell led Fed began purchasing roughly $40 billion a month in Treasury bills, lifting holdings from just under $200 billion to nearly $430 billion by late April. The Fed framed this as a technical liquidity or “plumbing” operation.

Lacy sees that explanation very differently.

“The Fed said that they were upping the bill purchases because the banks were short of liquidity, and this was a technical operation. Nothing could be further from the truth. This was not a plumbing issue. If the banks were in dire need of liquidity… the bulk of those purchases would have gone into idle balances, but they were not. They were directly used and explosively sold.”

The money that flowed directly into bank balance sheets was put to work. Loans and leases grew at nearly a 10% annualized rate, while commercial and industrial lending was running closer to 20%. You can see in the chart below that what Lacy calls a Fed Driven Liquidity Impulse meant that something different happened this time when the Fed started expanding their balance sheet.

Normally, that expansion showed back up on the Fed balance sheet. This time it didn’t. It became hot money that got multiplied throughout the system, expanding the money supply and triggering inflation not just in the first quarter but in future quarters as well.

I remember asking Lacy and a few others over the last decade why the massive QE and liquidity expansion after the Great Recession didn’t result in an explosion of loans and other bank activities. Partially, it was because the demand wasn’t there and partially the banks were repairing their balance sheets from the aftermath of The Great Recession. That has changed.

This is the part of Lacy’s presentation I kept coming back to afterward.

“In essence, what the Fed did starting in mid-December is they actually were reversing the elements that had been previously pushing the inflation rate generally downward. So now we have the issue of not only solving the oil shock, but we have to unwind the Fed balance sheet as well.” (Emphasis mine.)

I asked Lacy in the Q&A why a 5% move in the Fed balance sheet made a difference. Part of it is answered in this next chart, as it is what is in the balance sheet that makes a difference. They are partially moving from longer-term debt to shorter-term debt.

You can see why Lacy thinks this changes the arithmetic rather dramatically.

His inflation outlook is fairly blunt: inflation will climb above 4%, with periods that could push closer to 5% or even 5.5%!!! That’s a very different world than the one investors got used to after 2008. The historical parallel Lacy reaches for is Arthur Burns easing monetary policy into the 1973–74 oil shock, which he views as one of the great policy mistakes of the modern era. The difference this time, in Lacy’s view, is that the Fed began easing conditions before the oil shock fully arrived.

(By the way, I asked Lacy off-line if he agreed with me that Jerome Powell has been the worst Federal Reserve chair since Arthur Burns. He said yes and then said why. A number of other speakers said the same thing to me, but I don’t have their permission this morning to mention their names, but I will try to. If it was just this one mistake, I wouldn’t say that. But his disastrous handling of monetary policy during and after Covid, his 2019 debacle and other various misadventures didn’t speak well for his tenure. I am sure he is a very nice man, educated and thoughtful. But his core understanding of the mechanics of monetary policy and the outcome from his choices leaves something very lacking.

In future letters about this SIC, we will talk about the extraordinarily difficult situation that Kevin Warsh finds himself in as he begins his tenure as Fed chair. I can’t recall a time since Volcker that a Fed chair came into his position with such extreme externalities. If Lacy is right and we see 4.5% or 5% inflation, how can he cut? We will get to that when we talk about interest rates and Fed policy in a later letter.)

Fog Beneath the Surface

David Rosenberg was our leadoff hitter this year (as he has been for almost 20 years) with a presentation titled The Fog of War, though he quickly moved beyond the war itself. In Rosie’s view, what mattered more was oil, and beyond that the economic and financial imbalances already embedded in the system before the conflict even began. Rosie offers a somewhat different view on inflation.

Rosie’s not an inflationista. In his view, the larger danger is recession, not inflation. He pointed out that inflation lingered in 2021–22 because workers had real bargaining power and wages could chase prices higher. That mechanism, he believes, is largely missing today. Several of his charts suggested the labor market may be softening faster than many appreciate, with unemployment expectations already approaching recessionary territory.

Unemployment expectations are already at recessionary levels, and workers who fear losing their jobs generally don’t push for raises.

Barely more than 40% of Americans expect a pay increase in the next year.

The median expected wage gain is just 0.6%, and the Indeed Wage Tracker is back near 2%. Rosie’s point is straightforward: this is not what an inflationary labor market looks like.

As he put it:

“What is more important than labor? This is the stuff the Fed never talks about.”

He also has little patience for the headline payroll numbers the Fed keeps reacting to. He’s not alone in that. March 2025 was first reported at 228,000 jobs and later revised down to 67,000. June 2025 came in at 147,000 and was later revised to negative 20,000. In Rosie’s telling, the labor market is significantly weaker than the headlines suggest.

“Over 90% of the time since January 2025, these numbers have been revised down by 1.1 million. You’ve got people, their brain is fudge, that think that we have a healthy labor market on our hands. You’ve got people in the Fed that don’t even talk about it. They’re so consumed with inflation fear, they don’t even talk about employment.”

Rosie then turned to productivity, which I think is one of the more interesting parts of his framework.

“In the past two years, 92% of the economic growth in the US economy came from productivity. 8% came from labor input… In any given year, what is normal? What is normal is that there’s an even split, 50/50… At those technology peaks, it’s 70% productivity, 30% labor input. This is 92 to 8. How does anybody think that 92% contribution to the economy of productivity… is inflationary?”

At 92/8, Rosie’s point is not simply that inflation is slowing. It’s that this is no longer an economy where labor has enough leverage to generate the kind of embedded wage inflation the Fed still seems worried about. He sees tariffs in a similar way. In his framework, tariffs are primarily a price shock, not a self-sustaining inflationary cycle. Without wages chasing prices higher, inflationary spikes tend not to become self-reinforcing. At least not without wages following along.

He also spent time on the shelter story, which in Rosie’s view still doesn’t get enough attention. Shelter costs, including rents and owners’ equivalent rent, make up roughly 30% of CPI and nearly 40% of core CPI. Real-time housing data already show new lease rents falling, vacancy rates near cycle highs, and home prices cooling.

The problem is that the BLS shelter calculation lags reality by 12–18 months. That means the disinflationary impulse is still slowly working its way into the official inflation data and should continue doing so for some time.

Finally, before the war introduced a new oil shock into the equation, Rosie pointed to the Dallas Fed’s trimmed mean PCE as evidence the inflation problem was already beginning to solve itself. Both the 12-month and 6-month trends were already moving steadily back toward 2%.

As Rosie put it:

“Here’s Warsh’s favorite inflation metric. The underlying-underlying trimmed mean 12-month PCE, the six-month trend, they’re already heading back down to 2% before the war started.”

Revisions, Revisions, Revisions

Danielle DiMartino Booth thinks we should probably stop talking about recession entirely in the future tense. In her reading of the revised data, the US economy may already be in one.

The BLS initially reported 1.7 million jobs created in 2025. After revisions and quarterly census adjustments, that number fell to just 123,000. In Danielle’s framing, eleven out of every twelve reported jobs effectively disappeared. That should probably get more attention than it does.

More importantly, beneath the headline numbers, the private sector posted net job losses in both the second and third quarters of the year.

“You do not have two consecutive quarters of job losses — and this is the hardest data that exists — without the United States economy being in recession. Mark my words.”

Danielle also pointed to consumer data that increasingly tell the same story: flat real retail sales, a depleted savings rate, and growing use of buy-now-pay-later financing not for discretionary purchases, but for utility bills and dental work.

You can see why she believes the Fed is drifting toward an uncomfortable corner. Layer a five-sigma gasoline CPI shock on top of an already weakening consumer, and Danielle sees a central bank trapped between inflation it cannot really fix and a recession it still refuses to acknowledge.

Institutional Questions

I also want to spend a moment on a conversation at SIC that we’ll almost certainly be returning to in the coming weeks: René Aninao and David Bahnsen.

Neither was really arguing about whether inflation is transitory. Instead, their concern was whether the institutional architecture surrounding the Federal Reserve is capable of responding correctly to the next major shock without further distorting the system.

David believes that much of the Fed’s expanded role ultimately emerged because Congress increasingly abandoned its own fiscal responsibilities. He said:

“I do not believe the Fed took this excessive authority. I believe Congress failed to do its job. The Fed stepped into a vacuum.”

Whether you agree or not, it’s an important point.

René’s concern was what happens during the next crisis, which he believes is inevitable under a future Warsh-led Fed. The real test, in his view, is whether emergency measures remain temporary, or whether each crisis permanently expands the Fed’s footprint once again.

He also made a point I am still thinking about. Embedded inside every Treasury yield is an assumption about American institutional and military credibility as guarantor of global trade and financial order. Read that last sentence again.

They also both believe that under Warsh the Fed will move away from longer-term bonds to short-term bonds, trying to take the Fed’s hand off the scale. More on that in a later letter.

Middle Ground

Let me briefly touch on Barry Habib’s inflation framework as well. Barry has won four out of the last seven Crystal Ball awards from Zillow for the most accurate mortgage interest rate predictions out of 150 economists and has always been in the top five.

Barry’s view is that oil matters and matters a lot. Tariffs matter too, but more as a one-time price adjustment than a permanently compounding inflation cycle.

As he put it:

“Inflation looks like a staircase. One on top of another, every year, higher, higher, higher. Tariffs are different. A tariff is a one-time price adjustment. It’s like one step and it stops.”

Most of the tariffs were imposed last summer, so as those year-over-year comparisons begin rolling off, they eventually become disinflationary mathematically.

He also pointed back to shelter, which still makes up roughly 44% of core CPI and is measured using a BLS methodology that has barely changed since the mid-1980s. Barry believes real-time shelter inflation is running closer to 1% while the official data still shows something closer to 3%. If Barry is right, official inflation data may still be materially overstating real-time shelter inflation. That lag alone should continue pulling reported inflation lower over the coming months regardless of what happens with oil prices.

Thus, his government-calculated CPI inflation forecast is between 3.2% and 3.5%. He would agree that CPI might not be the best measure of inflation, but it’s what we pay attention to. And he has a pretty good track record of forecasting that number.

Post-COVID Economy

I should also mention Jim Bianco, who kept coming back to the idea that we are trying to analyze a post-COVID economy using pre-COVID assumptions. In his framework, the low-inflation world that defined the post-2008 era is largely gone, replaced by a structurally different environment shaped by demographics, de-globalization, energy shocks, and changing work patterns.

“So inflation in the post-COVID period has definitely moved higher and has been at a much higher rate. In other words, what I’ve argued is, it’s a different cycle. It’s a different cycle on inflation altogether right now… There’s more going on with inflation than just whether or not we’re going to have technology. There’s de-globalization, there’s instability in the world with wars. There’s changing of work habits with remote work… Everybody’s lifestyle is vastly different today than it was in 2019, and we’re not going back to that.”

Investors built portfolios around the assumption that the post-2008 world would continue indefinitely. Jim’s point is that it may not. We are going to revisit Jim’s session in depth in later letters, but I wanted to give you his thoughts on inflation.

My take? I think inflation is heading higher. That is going to take a rate cut off the table. Warsh is going to start reducing the balance sheet quickly. And will use the balance sheet reduction as a way to deal with inflation rather than actually raising rates. Nothing tectonic, unless the oil price shock continues for longer than the market currently thinks. We will get to energy in later letters.

Again, as a reminder, you can get the transcripts and slides from the presentations here. There is just so much more than I can cover in a few letters. This deserves some of your attention.
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Katie and the GLOBAL bond freakout. Don’t panic- it’s not our politics!

Posted on May 15, 2026 by henry tapper

Every morning I get an email from Katie Martin.

She is consistent in pointing out that markets move against those who hold bonds for growth when the world is feeling nervous

Katie finishes as this blog starts. This is not about Keir Starmer. Bonds are in a freakout everywhere on the globe there is a bond market!

the personality politics really don’t matter that much. A bit, absolutely, but not lots.

I know I’m a broken record on this, but everyone calm down.

UK disaster tourists,  tell me I’m wrong.

 

This bond issue is important.  I’m telling myself “calm down“when I stare at the carnage of lifestyled DC plans that are buying them and selling equities.

I’m in one and I hate it – hate being told that I’m defensively invested when my retirement is disappearing in front of my eyes. I’ve been talking with Patrick Tooher of the Mail about this most of this week.

I’m tempted to blame Keir Starmer for wrecking my plans but I know it’s not. I’ve been told this by Patrick Tooher and Kate Martin! Edi Truell posted as much and is as consistent in pointing out that while  bonds are paying great yields they are rubbish to hold for capital returns. This is the message I tell myself – and yet like most people of my age I’m investing for the next 30 years in bonds! I have it written on my heart!

“It’s nothing to panic about , just don’t let yourself be put into lifestyling bond funds!”

Yet I do! Why do I fall for the “bonds are defensive” when I know everyone I respect is right in staying invested in real assets!

It’s good to remind myself of sanity from Katie!

Join me on a magical mystery tour of headlines and factoids about weakness in the global government bond markets this week:

  • “The US government has sold 30-year debt at a 5 per cent yield for the first time since 2007 amid mounting signs that Donald Trump’s war in Iran has unleashed a new surge in inflation.” Oof!
  • Japan’s 10-year yield is now above 2.6 per cent. That’s comfortably the highest I can ever see it on my screen, ever. Its 30-year yield is getting close to 4 per cent. You read that right. The country that kept bonds in the deep freeze for decades is finally seeing some movement, and it’s up (for yields).
  • German Bunds are yielding 3.6 per cent for the 30-years, the highest since 2011. The 10-years are also over 3 per cent.

I think you get the idea here. Bonds are being put through the mincing machine globally at the moment, primarily due to signs that energy-led inflation is taking hold. Central banks may have to start cranking up rates to deal with this, and that pushes up borrowing costs everywhere. This brings me to:

  • Gilts are not happy. Ten-year yields are over 5 per cent, the highest since 2008. Thirty-year yields are also at 5.7 per cent — ouch!

Putting that point last demonstrates the UK is not such an outlier. Yes, the UK is experiencing one of its periodic political dramas. And yes, gilts have weakened substantially. Yes, this is bad. But is it all the fault of the politics? Far be it for me to play down the powers devolved to Andy Burnham, mayor of Greater Manchester and pretender to the top job in Downing Street, but as far as I’m aware, he has nothing to do with the Japanese government bond curve.

Clearly, some of the stress about gilts is overdone. That’s not to say they are not vulnerable. They lack the protections that some other major bond markets enjoy — the alphabet soup of European Central Bank protection measures in the Eurozone, the luxury of being the world’s dominant reserve assets in the case of US Treasuries, and so on. The UK economy has niggling inflation problems, which bond investors don’t like. And there was that whole Liz Truss thing.

Higher borrowing costs are indisputably unhelpful for the UK. But sterling is steady (around $1.35 or €1.15). You can put your tin hats away.

Politics are making a bad matter marginally worse, for sure. Politicians themselves could make it all much, much worse still. (If you are one, please read this.) Specifically, things that would make it worse would include a run-up (real or potential) in inflation, fiscal incontinence or loads of new borrowing. Other than that, the personality politics really don’t matter that much. A bit, absolutely, but not lots.

I know I’m a broken record on this, but everyone calm down.

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IHT issues for the dying, their pension administrators and personal representatives

Posted on May 15, 2026 by henry tapper

While this blog has been in favour of the Treasury discouraging using pension pots to mitigate Inheritance Tax , it is worried by the latest note coming out of the Treasury’s HMRC.

The HMRC has published further detail on good practice in paying IHT on unused “pots” saved for retirement by those who have substantial assets elsewhere. You can find its note  here

This has prompted timely and  good thinking  on this from LCP who have previously warned that those with big unspent pots are cashing them in for other strategies than paying IHT on the substantial assets elsewhere.

You’d expect that conscientious advisors will find better ways of organising estates with death in mind. There is strategic work from advisers underway,  but there is also implementation of the payment of the tax and this is where concern in May 2026 is focussed.

LCP are  pointing out that not just that the execution of these strategies is being put at risk but that the administration of tax payment by schemes is endangered  by the drip drip of HMRC notes.

This from Emma Simon in Corporate Adviser

HMRC is giving pension schemes insufficient time to prepare for changes which will bring pensions into the inheritance tax net next year, according to consultants LCP.

Their stark warning comes as HMRC publishes a technical note today, setting out further details of how this new regime will operate. This includes information on the process for calculating and collecting inheritance tax liabilities on unused DC pension pots.

HMRC has confirmed that further information will be provided “at intervals” between now and next April, with final guidance only expected in Spring 2027 – just weeks before the new system comes in.

LCP says this risks being too late, and could leave schemes struggling to update member communications and information ahead of this new regime.

LCP have a point; they are administrators of DC pensions for companies but they are arguing for a much wider industry who will fear falling foul of best practice by the HMRC.

Today’s clarification sets out details of how this work. It confirms that from April 2027, unspent DC pension pots and certain other pensions will be within scope of inheritance tax (IHT). This means a personal representative (PR) will need to track down all of a deceased person’s pensions and contact each pension scheme or provider.   

The scheme will also need to provide information on the pension value and who is due to receive the money.  Transfers to spouses and civil partners who are long-term UK residents will remain exempt from IHT.

LCP and Corporate Adviser give us an excellent summary of the note;

The HMRC states that the deceased representative will combine this information with information about the rest of the estate and use a new online HMRC tool to work out what IHT is due, if any.

If IHT is due, the PR will need to notify each pension scheme of their share of the IHT bill.

HMRC has confirmed that in order to ensure money is available to meet this tax bill the PR will be able to instruct pension schemes to withhold up to 50 per cent of the pension until the IHT has been settled. Today’s bulletin says that this power will often be used quite early in the process, but should only be used where the PR has ‘good reason’ to think that IHT will eventually be due.

The PR – and any beneficiary of the pension – will also be able to instruct the pension scheme or provider to pay IHT directly to HMRC on their behalf.

It  has been made clear by MoneyHelper that Personal Representatives will not have access to the deceased’s pension dashboard, to help them. Recent information brought me by Richard Smith suggests that the dashboard will not be available till at earliest September 2027 and not till possibly march 2028. There will be many people near death who will die before the dashboard opens.

LCP says HMRC update also confirms that death-in-service benefits are excluded, as expected. Nevertheless, there will be a requirement to report these benefits. LCP says this could be a burden for life-assurance-only schemes that currently do little or no reporting.

The bullet also confirms there will be an onus on employers and workplace pension schemes to ascertain if those on long-term sickness and other absences qualify. It says it anticipates that this will sometimes require legal advice.

New clarifications have also been provided on more complex death in service benefits – for example where the benefit has two or more components.

Tim Camfield, principal at LCP, said there was welcome clarification for bereaved families around quicker access to part of pension benefits.

“There is helpful clarity here for bereaved families that half of the pension should generally be able to be paid out quickly,” he said.

“Pensions have often been a vital source of income for families following a death as they are outside the estate so can be accessed quickly. The estate — and from April 2027 the other half of the pension too — can often be in limbo for far too long for beneficiaries.”

However, he warned that schemes still lacked the detailed operational guidance needed ahead of implementation.

“We have concerns about the impact of further guidance being issued in spring 2027, just weeks before actual cases begin to arise,” he said.

“HMRC’s consultative approach is welcome, but time is running out for HMRC to give schemes the detailed information which they will need to implement a new system which starts in less than a year’s time.”

LCP’s concern is for those who know they’re close to death and those who administer their pensions. It is also concerned for those lined up to be Personal Representatives once someone dies.

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Have Your Say: Whack Labour Over Leasehold Betrayal

Posted on May 15, 2026 by henry tapper

We are angry.

We know you are, too.

The local election results should have been a wake-up call for the government.

A demand for radical change and for taking on the vested interests holding our country back as greedflation soars.

No support for more tinkering to protect Big Money, while the people are being skinned alive in their homes because of leasehold.

Instead, yesterday’s King’s Speech announced a Commonhold and Leasehold Reform Bill infected with the status quo.

Starmer’s incrementalism strikes again.

The only change from the draft Bill is absurd.

Leaseholders, instead of gaining rightful control of your rip-off service charges, a right to petition at the feet of your freeholder master for permission to get an internet connection!

The government is laughing at you: “let them eat cake”.

Check the King’s Speech background briefing notes, pages 45 to 48, for the underwhelming policy bullet points and the watered-down language.

We are already making noise.

Appearances in Inside Housing, the London Standard and, tonight, The Telegraph.

Our statement on X, reproduced below, has now reached over 600,000 views, angering the government and their lapdogs.

But we need to shout louder as Labour’s leadership chaos risks burying the story.

And that’s where you come in:
ACTION REQUIRED: JOIN PHIL IN OUR NEXT VIDEO
If you voted Labour at the general election but voted against the ruling party on the 7th because of the government’s dire leasehold record, we want to hear from you.

Especially if you moved to the Greens or Liberal Democrats, who mobilised strongly on Labour’s leaseholder betrayal ahead of the polls.

Londoners are also welcome, particularly in areas like Hackney, Southwark and Greenwich.

Join the fightback against the government’s sham leasehold reform by taking part in our new video.

No media experience is needed. It will be no more than 20 minutes on Zoom.

Your block, freeholder and managing agent won’t be identified, we’ll just require your first name and local authority.

If you’d like your voice to be amplified and can be available in the next few days, email harry@freeleaseholders.org.uk Weighing it up? Still drop Harry a line.

And to see how far this government has fallen, see our We Got the Power video, which went viral on X, featuring campaign supporters soon after Labour came to power on a manifesto promise to end leasehold for good:
NEWS CLIPPINGS
OUR STATEMENT
ORIGINAL X POST
LEASEHOLDERS SCREWED BY STARMER’S SECOND KING’S SPEECH: STATEMENT FROM FREE LEASEHOLDERS 13/5/26

To save his premiership, on Monday Keir Starmer lambasted the politics of incrementalism, yet the Commonhold and Leasehold Reform Bill announced in today’s King’s Speech is infected with the status quo.

This is more talk big, act small politics from the Starmer government.

It is an insult to the millions of leaseholders being looted in their homes that a Labour government has walked back its manifesto promise to “end” the feudal leasehold system, instead serving up sham “reform” designed to keep Big Money interests happy.

Astonishingly, the only new measure appears to be little more than a right for leaseholders to petition at the feet of their freeholder masters for permission to get an internet connection. It is the modern-day equivalent of telling the peasants to eat cake.

The inclusion of this pro-leasehold measure comes just days after the main freeholder lobby group held a cosy conference with a PR firm and government civil servants, seeking to reposition themselves as Net Zero delivery partners to gain control over even more of captive leaseholders’ hard-earned money under the guise of essential block “improvements”.

Our supporters are trapped in their homes, unable to sell or remortgage and suffering negative equity, while Hamptons has found that 37% of leasehold flats now have service charges in excess of 1% of the property value, which lenders increasingly refuse to back.

Right to Manage, for those lucky enough to perform the legal somersaults required to qualify, already shows that leaseholders can take a chainsaw to wasteful spending, with our supporters achieving average service charge savings of 20–30% by removing extractive freeholders and choosing local contractors.

Yet this Bill fails to slash the red tape and introduce a universal Right to Manage, despite the Law Commission’s 2020 blueprint and its inclusion in the Labour manifesto and the first King’s Speech.

With this Commonhold and Leasehold Reform Bill, the government is propping up the service charge racket and the property mafia who benefit.

Instead of giving leaseholders rightful control of their homes, money, and lives in a cost of living emergency, Starmer and his ministers have sided with vested interests, which is killing the housing market.

It would be particularly cruel to bring forward amendments to the 2024 Act while still leaving leaseholders in financial servitude to their freeholders because they cannot afford to buy out their freehold due to uncapped development value.

This is despite the Law Commission’s recommendation to restrict development value, and a previous Conservative promise that was ultimately dropped under lobbying pressure before the 2024 legislation was passed.

Under Starmer’s Labour, leaseholders are doomed as corporate capture of policymaking continues in the post-Mandelson era.
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L&G – another target for American private equity firms?

Posted on May 15, 2026 by henry tapper

L&G is generally considered Britain’s number one life insurer. This is down to it’s numbers, these are last year’s Bulk Purchase Annuities league table

It worries the FT that the life company with the largest insured master trust, the insurance company with the biggest share of the buy-in market is seen by the FT as a target for American Private Equity Houses

To get its Bulk Purchase Annuity crown it had to do a deal with American Private Equity firm

The upstart private capital players have now saturated US demand for annuity products, however, and are instead hunting growth in L&G’s core market: pension risk transfers. Antonio Simoes, the man who took over from Nigel Wilson has run into the arms of those who might buy him.  He signed a $20bn deal with New York’s Blackstone for access to US private credit. A former L&G executive told the FT this was “bizarre”, since it was an open acknowledgment that L&G could not compete in a crucial market.

My love of L&G has been based on Mark Wilson’s pioneering of what several years later became the Mansion House Accord

As one of the UK’s most outspoken critics of domestic under-investment, Wilson threw L&G’s balance sheet behind early-stage companies, massive housing projects and science parks, arguing for planning reform and financial rule changes that he believed would help pensioners benefit from British growth.

But L&G since his departure has lost its nerve.

Wilson’s high-conviction style delivered some large losses, such as a £279mn writedown in a bet on modular homes that ran up against planning delays. Simões, since taking over, has sold housebuilder Cala and a US business, and collapsed Legal & General Capital into the main asset manager.

The main asset manager, LGIM is huge, but it’s margins are tiny. They’ve been improved by creating some private market action but not by much. Simões points to an improvement from 0.07 percentage points in 2024 to 0.09 percentage points in the first quarter of this year.

Perhaps its most valuable market it has grown itself is the DC pension schemes it insures with passive funds.

It manages more than £200bn in defined-contribution pension assets. Simões says this market sets L&G apart from alternative asset managers, which have focused on the more capital-intensive defined benefit schemes. We await to see how it will compete if DC turns to CDC over the next ten years. DC pension margins are a lot higher than what it can get from the highly competitive passive funding where institutional prices can be negative, the only money being made being from stock-lending.

And much of the asset management business remains concentrated in low-margin passive strategies;

Analysts and former executives increasingly question whether it has the scale to compete. Rival European insurers such as Axa and NN Partners have called it quits.

As for the private market action, this is now attracting some unwanted attention of the Prudential Regulatory Authority.  L&G’s higher exposure to risky types of US private credit, when compared with its European insurance peers, has  drawn analysts’ attention at a time when concerns have been mounting about the quality of loans in a relatively new market.

To use a phrase that isn’t heard much in insurance, L&G’s story has been over the past two years a “shitshow”.

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Yvonne Pearce who helped so many, has not had her retirement.

Posted on May 14, 2026 by henry tapper

I was very sorry to hear this news

My correspondence with her was always positive and working towards a better deal with those who weren’t getting a good deal. This was typical.

She sent me this when she was pensions manager at DMGT (the Daily Mail). She since ran Accenture and most recently MS Amlin. I first new her when she was at Old Bailey looking after Accenture.

My partner had a word for  her. Yvonne was to her “feisty” which is a great compliment in her language. Her husband Paul Cummins is a good man and we as a couple wish him well.

Reading the many obituaries left for her, I realise she was one of a generation of great pension managers we may never see again. We are most sorry that she did not have the retirement she helped so many to.

 

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The kings speech and improving things for those who are getting old

Posted on May 14, 2026 by henry tapper

I have picked up from the pensions industry some comments on the lack of reforms of pensions but it wasn’t till I read this piece and the article in the Guardian that I realised how little we have done and are doing to help older people with care. This is as much to do with growing old as the income that pensions bring.

Our ageing society… and what we can learn from other countries

Tony Watts OBE, Editor info@theageactionalliance.org

An excellent article in today’s Guardian encapsulates pretty much all of the arguments made on a regular basis in this column.

The author has travelled around the globe to see how other countries are dealing with the challenges (and, lest we forget, opportunities) of their ageing societies.

In brief: European states have failed to plan for the long term while countries like Japan and Taiwan grasped the nettle early enough to now have solutions in place.

The section on care is the most damning:

“When it comes to building a transparent system for funding care for older people, the UK is the most abject of all.

“Successive prime ministers have called for change yet have run away from sensible reforms produced by commissions they established, hoping that, by delaying a problem, it would somehow go away.”

And while all this short-termism is certainly being felt by those at the receiving end, there’s a lesson for the politicians in this too: leaders who have failed to act “are being punished anyway”.

On which note, there was nothing to lift the spirits of social care leaders in the King’s Speech, while dealing with pensioner poverty also missed the cut.

Meanwhile, care leaders sensibly recognise that some newly-elected councillors around the country (the non AI-generated ones anyway) might not be fully up to speed with adult social care and are offering (in the nicest possible way) to fill them in.

Carers UK have produced a new report on the unenviable plight of those trying to combine caring for a loved one with keeping a roof over their heads, and there’s a lovely piece on how professional carers often play a huge role in their clients’ lives.

There’s more worrying news from the pensions and savings sector as we learn that around half of savers don’t feel they are in control of their retirement finances, plus a warning from Martin Lewis not to inadvertently leave your pension to your ex.

We end with an interesting piece on the research going on around the world on healthy ageing and discover why some older people seem glued to their TVs.

I would add to this beautiful article this passionate comment from Independent Age

Independent Age Chief Executive Joanna Elson, CBE said: 

“The King’s Speech did not go far enough in addressing pensioner poverty. We welcome the UK Government’s ambition to tackle the high cost of living and improve living standards, but the legislative agenda needs to meaningfully support older people on low incomes.

“Today’s announcement left a glaring hole in the Water Bill, with no mention of a national social tariff for water in England and Wales which our research has shown would lift hundreds of thousands of older people out of water poverty.

“Energy support measures are welcome and we urge the UK Government to go further byenhancing the Warm Home Discount and introducing a more comprehensive energy social tariff to provide long-term protection against rising energy costs.This is extremely important in an increasingly volatile world.

“The income of the older people we support is often dangerously low and does not even cover the basic necessities of life. People tell us they are washing less, having just one small meal a day and not socialising as they cannot afford a cup of coffee. With 1.7 million older people living in poverty, the time for action is now.”

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The spirit of Torsten Bell should not be lost – if he moves on.

Posted on May 14, 2026 by henry tapper
Steve Webb
Torsten Bell
Guy Opperman

 

Steve Webb has some skin in this game. He knew how to hang about to see things through

Steve hung around for very nearly five years as Pensions Minister and it might be argued that he was too good to be fired but a Liberal who could not be promoted. Webb , like Bell came from a think-tank and like Bell, came to the job with a big reputation in pensions.

But Bells and Webbs are hard to find and I don’t think there is a replacement for Bell who could slot into place overnight. After Bell came the short stays of Altmann and Harrington and after the equally long lasting Opperman we got four prime ministers none of which stayed long enough to understand what pensions needed.

People tell me that much of the Pension Schemes Act were half-written by the time Bell arrived in post, this may be the case but I don’t suppose that we would have neither have got a Bill or an Act into place without a pretty committed Pensions Minister.

What happens to Torsten Bell , were he to be promoted from Pensions Minister, then we would be reminded of what we had lost.

My interest, the changing CDC  has taken on its vital second stage and we have been promised a third stage “Retirement” CDC (rather than workplace CDC) and have the draft of legislation by the end of the year ( a promise Bell made to my question in March this year). There is secondary legislation to be written , submitted to parliament and debated before any of the measures of the Pension Schemes Act impacts on what pensions do.

This is a difficult legacy for Bell to leave a successor and my hope is that Bell has a role going forward that allows him (from his elevated role) to be on hand to sort out problems for his successor.

I don’t think anyone should stand in the way of Torsten Bell’s progress career wise. We have been privilidged to have had him for the two years he’s been in place. Not many Ministers have stuck the job for as long as he has.  Few have progressed their careers when leaving the role.

Webb and Opperman are both (in different ways) making their mark in pensions but outside of parliament.

Gregg McClymont, who was Webb’s opposition when he was in post is the one who springs to mind, being an opposition pensions minister is hardly going to win you friends when presenting your CV.

The other Pension Minister I should not leave out is Ros Altmann who remains not just an advocate of better pensions but a formidable voice in the House of Lords.

That puts in perspective the importance of having a good pensions minister, I was not interested in politics when selling personal pensions but the 10 Labour ministers that preceded Steve Webb had some good uns. Andy Young is old enough to remind me of the last Minister before Bell to see in and out a Pensions Commission. Whether we see Bell in place as Pensions Minister when Pensions Commission delivers its final report looks as unlikely as seeing Keir Starmer around for the report.

This report was put in place by Bell and I said last year when the Commission opened that it was kicking the “too hard” into the long grass so that the Pension Schemes Bill and CDC could be enacted and implemented. I had a vague hope that Bell would stick around to see CDC, Pension Schemes Act and Pension Commission report over the line and I still do.

To get so much from a Minister in one parliamentary term deserves applause. Torsten Bell has achieved 2/3 of his big jobs for private pensions in two years and we should be thankful.

 

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“Is LGPS over-exposed to dodgy private credit?” – asks Naomi Rovnick

Posted on May 14, 2026 by henry tapper

 

Thanks to Naomi Rovnick for making this excellent article available. You can find the original on this link.

Before reading the summary and article below, here’s Naomi’s explanation of what’s important to ordinary readers

UK council pension schemes – for essential workers like dinner ladies and refuse collectors – have piled in to private credit and shadow lending.

Our analysis of thousands of pages of annual reports and council meeting minutes discovered that the council schemes managing £400bn between them have invested 13pc of their assets, on average, into private debt and so-called multi-asset credit. Iain Withers did all the the data work here.

MAC can be lots of things but analysis of the holdings of big ‘pooled’ funds that invest exclusively for councils showed chunky allocations to mortgage backed bonds, securitised credit, CLOs/leveraged loans etc.

So, quite some exposure to sectors that rely on a Goldilocks economy – where growth is good enough and interest rates are just high enough for weaker borrowers to keep paying high debt servicing fees.

Are we in Goldilocks anymore? The investors rushing out of private debt and rising defaults on leveraged loans signal we might not be.

Almost 7 million people are in the LGPS council pension schemes of England and Wales. They need not panic. They have to get paid on what is now a fairly unique ‘final salary’ basis.

Councils’ contributions to the pensions equate to about a quarter of council tax revenues per 2024-2025 MHCLG figures.

Reform reckons the LGPS can be a sovereign wealth fund – as if librarians’ pending contributions are similar to Abu Dhabi’s oil and gas fortune. I am not sure if the librarians would agree.

LGPS schemes are big but many face ‘negative cash-flows’ broadly because of the lop-sided demographics of more higher paid older workers retiring and younger folk paying less in.

Read on for a bit more data and some extra finance geekery about ‘liquidity,’ in hopefully simple terms.

Britain’s local council pensions bet big on shadow lending

By  and 

Summary

  • LGPS private credit, multi-asset credit exposure is up – filings
  • Experts warn of liquidity risks if market conditions worsen
  • Some schemes have bigger exposures, higher than private funds

Local government pension schemes managing assets totalling some 400 billion pounds ($541 billion) are among Britain’s biggest investors in non-bank “shadow lending” funds, a sector the Bank of England recently flagged concerns over.

Almost half these schemes in England and Wales have invested ​10% or more of their assets in such funds, a Reuters analysis shows, exposing the pensions of staff from classroom assistants to refuse collectors to swings in what are still ‌opaque markets.

The high and steady returns of non-bank lending in the decade to 2024 made it an attractive option for managers of such schemes, which guarantee members a final salary-linked pension.

But devaluations and default warnings in non-bank lending, including private credit, have rattled investors this year and prompted regulators to warn about risks including unclear valuation techniques and hidden leverage.

While the biggest signs of strain have been in the U.S., British banks have also disclosed hits and the BoE has raised concerns about the sector’s opacity and is stress testing private credit and ​equity.

The government has long encouraged pension schemes to invest ​up to 10% of their funds in private assets, which include private equity, infrastructure and real estate, to boost returns and support Britain’s economic growth.

A Reuters review ⁠of the annual reports of the 86 schemes showed LGPS have amassed a total of more than 32 billion pounds ($43 billion) of private and multi-asset credit exposure.

The review shows that, on average, they have invested 4.2% ​of their assets into private credit and a further 8.7% in multi-asset credit funds, opens new tab. These hold a mix of illiquid and more easily tradeable non-bank debt from corporate bonds to asset-backed and leveraged loans.

That compares with official estimates, opens new tab indicating the defined-contribution pension schemes that serve most corporate employees allocated 3.5% to all illiquid investments in 2025.

Meanwhile, of the 47 LGPS that gave private credit targets, all but four fell below them, indicating they could buy more.

PROJECTED RETURNS

Private debt funds often require investors to commit capital long term and call on more of it during downturns, which Europe’s Financial Stability Board warned, opens new tab last week could force pension investors to sell more ​liquid assets to raise cash.

“The potential negative outcome comes when the projected returns that they (LGPS) were promised or had projected are just not available,” said Mick McAteer, a campaigner for financial inclusion and a former FCA board ​member.

“Even if there was a bit of superior performance in the past, the conditions that worked in the past are no longer there,” he added, noting that higher-risk credit tends to perform when economies are growing and interest rates low.

These ‌conditions are now ⁠threatened by the Iran war.

Ludovic Phalippou, a professor at Oxford Said Business School, said signs of stress among borrowers could lead to losses for non-bank loan funds and make it harder for schemes to exit.

While the most recently available LGPS data shows local authority retirement fund allocations to private debt were 3% of portfolios on average in 2024, a Reuters analysis showed some council schemes’ exposures were far higher.

London’s Lambeth has invested almost 26%, opens new tab of its assets in private debt and multi-asset credit, its latest published data to December 2025 showed. Cumbria’s latest annual report, for the year to March 2025, showed it had allocated 8% to private debt.

Neither scheme responded to requests for ​comment.

Top combined allocations to private and multi-asset credit in the year to March 2025

Top combined allocations to private and multi-asset credit in the year to March 2025
Top 15 target allocations to private credit alongside their actual exposures
Top 15 target allocations to private credit alongside their actual exposures

‘NO IMMEDIATE CONCERNS’

Investment consultant Hymans Robertson’s chief investment officer ​David Walker said, however, that council retirement schemes ⁠were not over-exposed to non-bank lending.

“They’ve got other asset classes they can rebalance into and so I don’t see any immediate concerns in terms of cashflow,” he said.

Private debt funds often tie up investors’ capital for years and multi-asset credit is widely considered as more liquid and more robust in a downturn, although some questioned ​this.

“Multi-asset credit and certain “semi-liquid” strategies often behave like private assets in stress scenarios, even if they are not labelled as such,” said Phalippou.

The liquidity management of ​British pension schemes was severely tested ⁠in 2022 when they faced capital calls on hedging positions during a gilts crisis, although many have taken action since to withstand future shocks.

Council pension fund documents showed some were making liquidity management provisions for private credit.

In West London, Hammersmith and Fulham council’s pension scheme was among a group of investors that pulled out of a private credit fund managed by Aberdeen , which the asset manager confirmed to Reuters it had now liquidated.

“In the current environment, we believe maintaining ⁠balance and flexibility ​across the portfolio is important, particularly given ongoing uncertainty around interest rates, economic growth and liquidity conditions in some private market segments,”

​Phil Triggs, tri-borough director of pensions and treasury for London schemes including Hammersmith and Fulham, told Reuters.

Gloucestershire’s local pension fund said in February it would borrow if private asset investments caused liquidity challenges “to save the fund from becoming a forced seller of assets”. The fund ​declined further comment.

Reporting by Naomi Rovnick and Iain Withers; Editing by Tommy Reggiori Wilkes and Alexander Smith

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