With the benefit of hindsight…a blog on pension transfers in draft for 30 months



I never published this blog – it has been sitting in draft since early 2018. Re-reading it today, it is clear that everything the FCA are saying today was public knowledge in 2018. Judge for yourself, could and should the FCA have acted sooner?


IFAs and the defined benefit promise

This article explores the relationship between IFAs and defined” benefit schemes, one that has historically been uneasy. It argues that the polarisation of opinion between IFAs who see pensions as “pots” of wealth, and those who regard them as a “wage for life” has never been stronger. This polarisation is present in politics, demonstrated by the differing view on “pension freedoms” at the DWP and Treasury, and present in Regulation, with polarisation between the FCA and tPR’s approach to these same issues.

This deep divide is philosophically between those who believe is that the management of financial assets should be a matter for the beneficiaries of those assets (the member) and those who think the creation of a lifelong income, a matter for collective endeavour.

And the fault lines created by these polarised positions are clear to see, wherever you look.

They are apparent from the Work and Pension Select Committee’s inquiry into Pension Freedoms, which focussed on the divisions in Port Talbot between BSPS members desperate to liberate the wealth in their pension scheme and the Trustees, who were (until recently) oblivious to the demand for “pension freedom”.

The fault lines were equally apparent in the disputes between Royal Mail and its membership (represented by the CWU) and the current dispute between USS and its members (represented by the UCU). In both cases, the employer believed philosophically that it was doing the right thing by switching from DB to DC accrual, based on evidence that ordinary people value a pot of wealth rather than a wage for life.

Contrarily, members have said no to a DC pot and held out for a wage for life. In the case of Royal Mail’s membership, this will mean an unguaranteed CDC pension and in the case of USS members, a continuation of guaranteed accrual from a DB plan.

An IFA, reading these paragraphs, has every right to be confused. Steel-workers are not normally considered as candidates for wealth management, but with average pots of c£400,000, they proved to be of great interest to a large number of IFAs. Meanwhile, the professors and lecturers who one would imagine financially capable, have gone out on strike , rather than be switched to a DC pension.

The polarisation of opinion cannot be defined on socio-economic lines, nor can it be defined in terms of education. In fact, the pension freedoms seem to be as popular on the streets of Tai Bach as in the City of London.

It now looks likely that once all transfers out of BSPS are completed (some time in April), around £3bn will have moved from “pensions to pots”. This is roughly the same amount that has been transferred out of the Lloyds Bank staff pension scheme and around 75% of the £4.2bn that Barclays have reported moving out of their pension scheme. It was not long ago that KPMG were estimating the total transfers from DB to DC in 2017 would be £6bn. What has happened?

The explosion of transfers  that has happened from mid 2016 onwards, cannot be explained by the Pension Freedoms alone, indeed , in its 2014 impact analysis, the Treasury saw no reason for the changes in the tax treatment of DC pensions as having little to no impact on DB to DC pensions.

Nor can it be considered a function of quantitative easing or the shift of DB assets from equities to gilts. While there may have been a marginal shift (major at BSPS), quantitative easing and the trend for DB pensions to “de-risk”, were established well before 2017.

What I believe has happened over the past eighteen months has had everything to do with adviser confidence, especially confidence in the IFA sector. Underpinning this confidence is the rise in world stock- markets which has seen equity-based wealth management solutions deliver fabulous returns to their customers for nearly ten years. There is a sense among many advisers I speak to , of invincibility in market forces and the power of investments in growth assets to deliver better outcomes than can be achieved from DB pensions.

The second factor that has given advisers confidence, is finding a mechanism to unpick the lock on the CETV, without creating disruption to their client’s cash-flows.  I mean by this the practice of conditional charging. By putting the bill for advice at the back end of the advisory process, IFAs can achieve a painless transfer to their wealth management solution that enables them to be paid from a tax-exempt fund without concerns over VAT. It enables clients to release their “DB wealth” without reaching for their cheque book and  it is a very elegant solution to the problems posed by the requirement of those wishing to transfer an amount above £30,000, to take financial advice.

There is nothing uncompliant about conditional charging and it is now widely used by the majority of Britain’s 2,500 transfer specialists. However, conditional charging is showing signs of stress. Ten firms have now “voluntarily” handed back their permissions to advise on DB transfers , leaving hundreds of clients orphaned from the transfer process and marooned in DB.

A recent article in the Financial Times, saw the Personal Finance Society’s Keith Richards, claim that Professional Indemnity Insurers were jacking up premiums for those remaining PTS’ and denying some cover. The practice of outsourcing pensions advice to specialist Transfer Value Analysts, has come under considerable pressure from the FCA.

All this is evidence of the deep divide between those who see a pension as a “pot of wealth” and those who regard it as a wage for life. Many advisers, such as John Mather, consider the defined benefit system, so broken, that engineering a route out of DB for clients , is the right thing to do. Meanwhile, the FCA insist that from their sampling in 2017, 53% of transfers examined, contained either questionable or wrongful advice.

The Pensions Regulator and the FCA are at last working together to produce a joint pension strategy. In a recent session of the Work and Pensions Committee, its Chair- Frank Field- suggested that advisers and trustees were living in “different countries”. The same criticism has been made of the two regulators.

It remains to be seen where this will all end up, few believe that we have seen the end to the DB transfers. The results of SJP, Old Mutual, Prudential and many other providers, suggest that pension providers are now reliant on the massive flows of assets brought to them by advisers. Many advisers now seem as addicted to conditional charging as they were to commission and the FCA and Pensions Regulator, seem powerless to prevent CETVs becoming business as usual.

As always, the analysis of the issue , post-dates it. The transfer from pensions to pots will go on, till a point where either the available assets within DB schemes have been exhausted, or a proper brake has been put on the transfer process, most likely by a Government with the will to ban conditional charging.

In the meantime. we have to hope that those in charge of this new found wealth, can deliver on their promises.


Posted in pensions | 2 Comments

Lets stop kidding ourselves about pensions


Three things prompt me to write this article

The work of Dr Iain Clacher and Con Keating into the unequal burden regulation places on the sponsors of defined benefit pension schemes

The agreement between unions, Government and employers in the Netherlands to move away from guarantees and towards what we call CDC


The amendment in the Pension Schemes Bill that commits the Pensions                       Regulator to sanction relatively aggressive investment strategies where                         trustees and sponsors want to keep a DB scheme open

The three matters are aiming in the same direction, the proper payment of pension promises through the efforts of employers, regulator and trustees working together.

It has long been recognized through surveys conducted by consultants (Aon and XPS most recently) that ordinary people look for their workplace pension to provide them with a pension. While there are many people who have opted instead to transfer their pension rights into the hands of wealth managers, it is generally acknowledged that such transfers are for the few who do not need a wage in retirement, rather than the many for whom pension freedom is a tank trap.

The Dutch decision should be seen in this context, if the alternative to a guaranteed system of pension payments is the workplace DC systems of the US (401K), Australia (Super) and the UK (workplace pensions), then better to keep a system which does at least offer people what they were promised – a wage in later age. 401K, Super and the British workplace pension system offer people wealth not pensions and the term “wealth” is not that suitable , if it is kidding people it is a substitute for a pension.

Simple truths (no kidding).

It costs a lot to pay a wage for life. If you want a wage for life at 60 and you want wage growth of 3% pa and for it to continue to your spouse if you die first, then think  of saving £750,000 before you can retire to  what the PLSA considers a moderate retirement  lifestyle. This level of wealth is beyond the comprehension of most people in the UK today but it is what is needed to provide a private income of £20,000 pa for the rest of your days.

This is why we need to inject some realism not just into the debate about what UK workplace pensions are supposed to be doing but also asking how we can preserve what’s left of our collective pension system, both in the UK and in the Netherlands.

Read Con Keating and Iain Clacher’s excellent article as an answer to that question. Consider the Lords amendment to keep DB open, as an answer to that question.

“I want to level with you”

Boris Johnson’s phrase, with which he introduced lock down , lives with us. COVID-19 has asked and will ask questions about the true state of affairs in the UK. If truth be known, if we use the valuation techniques employed for DB transfers and implied by the Pensions Regulator’s funding code, the transfer value of a full state pension is around £300,000- to provide us with a wage for life of c £8,000. You cannot take that transfer value as the purpose of the Government backing the pension promise is to keep people from destitution not make them “wealthy”.

£750,000 might give you a moderate retirement income but that is on top of your state pension, the reality is that to have even a moderate income in retirement , you need a million pounds to fund it – or you need to stay at work or you need to die young. These are the hard COVID-19 truths.

I want to level with you. There is no cheap way round this problem. Though you may want to create a lifetime mortgage on your property, you are unlikely to generate sufficient liquidity to provide you with the wage for life you would have got had you been in a DB scheme.

Those in tax-payer funded pensions such as the Civil Service, Teachers, Fireman’s or Local Government pensions will be getting millionaire’s pensions if they can retire on as little as £25,000 pa.

For the vast majority of workplace pension savers, the 8% of band earnings that is paid into their workplace pensions will not be enough and even if that 8% was doubled, there is no proper way of returning the wealth in the DC plans as a wage for life. The cost of advised draw down are currently excessive, the price of annuities too high and the risks of DIY retirement planning for the bulk of the population too awful to give much thought too.

We need pragmatic solutions for today and strategic solutions for tomorrow

By harnessing technology, we can at least make sense of our retirement savings today. A proper system of finding pensions, displaying pots and providing people with investment pathways is the best we can do today. It is not the nirvana promised by pension freedoms but it is better than nothing.

For the future we need a strategic solution and were we thinking as the Dutch are thinking, we would start moving to a non-guaranteed system of workplace pensions which did not promise wealth but pensions.

We need ways to encourage employers who want the real promise of a wage for life to be able to use their best endeavors to fund those promises. This might mean continuing to other funded pensions without guarantees or it might mean thinking about funding as Clacher and Keating do.

We need to resist the lock down of open pensions into “de-risked” bunkers from which there is no prospect of future accrual and every prospect of penury or bankruptcy for the sponsoring employer.

Posted in age wage, CDC, consolidation, pensions | Tagged , , , , , | 6 Comments

Why more funding doesn’t mean safer pensions.

I published this article last week under a different title and it didn’t get read much . I’m publishing it again because it is  very good  and because it challenges current received wisdom on DB pensions. Pensions have become needy and as the article explains, for all the wrong reasons.


The funding gap

Con Keating and Iain Clacher

Scheme funding is now the principal risk management tool for DB schemes, a development which has been encouraged by parliament and the regulatory authorities.

It appears that the answer to everything is ever more funding of the pension promise and at the heart of this approach is the risk of sponsor insolvency.

The purpose of funding appears now to differ between secured accrued debt and paying pensions obligations. Historically, for DB pensions, this purpose was to provide security for the promise accrued, or earned and unpaid, up to the date of insolvency.

It has changed to funding being adequate to pay all pensions as they become due or to purchase a contract replacing the as-yet unearned future benefits promised in the case of DB pensions.

This change of purpose significantly raises the level of funding required, which is costly to the sponsor employer. In previous blogs we have commented on the inequitable nature of this latter interpretation.
In this blog we shall investigate the costs that these funding strategies impose on the sponsor employer and conduct a small thought experiment to illustrate the nature and magnitude of the issue.

We abstract from the complexities of a full DB pension scheme, and consider a zero-coupon 15-year bond issued at a yield of 6% p.a. which we can view as a simplified approximation of the costs (of the employer) and benefits (to the employee) of a pension scheme.

The bond matures at par (£100) and the initial subscription is £41.73 (the discounted present value of the par value, where the discount rate is 6%). We choose 6% as the yield on this bond as our analysis of a small number of DB pension schemes has shown the average contractual accrual rates (CAR) of their stock of undischarged awards to lie in the 6%-7% range.
If this rate appears high, given current market yields, it should be remembered that it is the result awards made over a history stretching back as far as the 1960s and perhaps even 1950s. One notable feature of DB schemes is that awards made in the mid and late 1970s may have embedded very high accrual rates – in many cases over 14% at the time of award.

Subsequent experience and revised projection assumptions have lowered this rate materially, to less than 9%. This is principally the effect of far lower than assumed wage and price inflation, countered by increasing longevity.
Returning to our thought experiment, we next consider the position after one year, when the accrued value of the liability is £44.73 on the contracted terms. As above, this figure may be derived as the discounted present value of the ultimate payment (benefit) or the accrued value of the subscription (contribution) using the 6% contractual rate.

Let us also consider the effect of using an externally chosen discount rate, say, the gilt yield for the remaining 14-year term. Assuming the gilt-based discount rate is 1%, then the reported value of this liability is now £87.0.
Ordinarily, these values would be immaterial if no action is based upon them. However, to maintain the comparison with pensions we now introduce a collateral security funding arrangement for the obligation, in the amount of these reported values.


The difference in required funding cash flows is stark. It is immediately obvious that these funding strategies cause this obligation to differ in its effective term or duration, and with that their cost.

The original unsecured bond was 15-years. The secured 6% CAR-based accrued liability has a duration of 9.06 years, and the 1% discount rate variant has a duration of just 2.70 years.

The cost to the sponsor company in the unsecured case, where the obligation is funded at maturity, is 6% p.a. This rises to 10.13% p.a. when funding to the CAR level is required, and 38.07% for the 1% discount rate case.
A sponsoring company might well be prepared to accept a 15-year 6% obligation, and perhaps even a 9.06 year 10.13% obligation, but it is difficult to believe that any company would knowingly sign up for a 15 year 6% bond which could be foreshortened to a 2.70 year obligation at a cost of 39.07%.
This thought experiment illustrates the method by which DB pensions have become ’unaffordable’ even though there has been no material increase in the ultimate amount payable. It is the arbitrary application of exogenously sourced discount rates.

Investment returns and funding strategies

To estimate the cost of these different funding strategies to the sponsor company, we have assumed no investment returns. However, if we assume an investment return, we observe a fuller picture.  A return of 6% p.a. (1) is particularly informative.  At this rate, there is no cost to the sponsor beyond the initial contribution made at the time of award.

By contrast, an additional contribution of £42.77 (2) is still needed for the 1% discount rate case at the year one valuation. This contribution like all other assets in the fund will need to earn 6% per annum. This means that, in future, it will result in surpluses relative to the 1% discount rate liability valuation (assuming the discount rate remains at 1% for the remainder of the liability and is not decreased by other exogenous factors such as government largesse and QE).

This contribution is effectively an advance to the scheme on which it will earns the subsequent surpluses. If the excess funding (relative to valuation) can be extracted (3) at the time of occurrence (which is unlikely) the advance has an average life of 7.19 years, and 14 years if it cannot be recaptured before the discharge of the pension(s).

The practice of spreading large contributions over several years as a form of ‘deficit repair schedule’ is now common with changes to average schedules published annually in the Purple Book.

While having a schedule may alleviate a sponsor’s immediate liquidity concerns, it does little other than shorten the term of the advance i.e. . and these contributions still all earn the investment return of 6% p.a. in our example.

It may be that a 6% p.a. return on capital is competitive with the long-term investment opportunities available to the sponsor company, but this has the unique feature that, when market discount rates are used, its timing lies outside of the control of the sponsor employer.

Concluding Remarks

As pension funds are often promoted because of their long-term nature, it is worth noting that any contributions to a scheme, beyond the initial contribution, which constitute part the long-term capital of the scheme come about by extinguishing a long-term liability of the company.

There is no net gain in long-term investment. In fact, it may be that there is a reduction in productive investment as the money that comes into the pension scheme is invested in the financial economy i.e. existing assets e.g. equity in the secondary market or credit that is already in issuance.

This thought experiment is intended to illustrate the extreme dependence of the sponsor company’s cost of provision on the level of funding imposed and the shape of this through time. We have kept this to a single valuation, but it is perfectly possible to extend this analysis to include multiple dates, stochastic variation, and adjustments such as ”prudence”,but there would be little by way of new insight to the logic illustrated here.

Taken together, funding is a very inefficient and incomplete solution to the risk management problem of DB schemes, namely sponsor insolvency.

(1) If the investment return is just 1%, the sponsor cost is the single contribution of 44.85% for the 1% discount
rate case, while the cost for the CAR case is 9.44% p.a.
(2)This figure is the discounted present value at 1% less the initial contribution and the accrual on that of 6%.
(3) We have ignored the taxable nature of withdrawals from the fund.
Ian con

Keating and Clacher

Posted in pensions | 19 Comments

Covid-19 actuaries “Super Saturday” report

The Friday Report – Issue 14 (published Saturday July 4th)

Screenshot 2020-04-10 at 12.03.32


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

Every week, more is written on COVID-19 than any individual could possibly read. Collectively, the COVID‑19 Actuaries Response Group read more about the outbreak than most, so we’ve decided each Friday to provide you with a curated list of the key papers and articles that we’ve looked at recently.

Modelling – reports

Household secondary attack rate of COVID-19 and associated determinants in Guangzhou China: a retrospective cohort study; Jing, Q-L, Liu, M-J, et al 

This paper uses a contact tracing dataset from Guangzhou, to estimate the probability that an infected individual will transmit COVID-19 to a susceptible individual, among both household and non-household contacts. The analysis is based on infections from 195 unrelated close contact groups between 7 January and 18 February 2020.

The risk of household infection was lower in the youngest age group compared to the oldest, and was found to be higher in households of six people or less than in larger households. The authors estimate that the local reproductive number (R) was 0.5 in Guangzhou, whereas the projected R if there had been no isolation of cases or quarantine of contacts was 0.6.

Excess deaths from COVID-19 and other causes – March-April 2020; Woolf; Chapman; Sabo et al
Estimation of excess deaths associated with the COVID-19 pandemic in the United States, March to May 2020; Weinberger; Chen; Cohen 

These two brief papers look to estimate the excess deaths from COVID-19 in the United States. The first notes that the number of COVID-19 deaths reported in the early weeks of the pandemic may have captured only two-thirds of excess deaths in the US, with large increases in underlying causes other than COVID-19 including diabetes, Alzheimer disease, heart disease and cerebrovascular diseases. This finding is similar to analysis by ONS of data in England & Wales, as previously reported.

The second paper similarly finds that the number of deaths due to any cause increased by 122,000 from 1 March to 30 May 2020, which is 28% higher than the reported number of COVID-19 deaths.

Clinical and Medical News

Update on anti-viral drugs from the ‘RECOVERY’ trial

As previously reported, the ‘RECOVERY’ trial is a randomised trial of treatments to prevent death in patients hospitalised with COVID-19. Originally, the trial sought to study the effects of a Lopinavir-Ritonavir combination (anti-virals), Dexamethasone (a corticosteroid), Hydroxychloroquine (anti-malarial), Azithromycin (an antibiotic), convalescent plasma, and Tocilizumab (a ‘targeted therapy’).

As ongoing results have been analysed, Hydroxychloroquine is no longer being tested, and Dexamethasone is now only being tested in children. The most recent press release suggests that in this trial, the anti-viral drug combination of Lopinavir-Ritonavir do not appear to have significant mortality benefit in hospitalised COVID-19 patients . Consequently, this drug combo is no longer part of the RECOVERY trial.


In the last week we have heard from the Oxford-Astra Zeneca vaccine trial, and the BioNTech-Pfizer vaccine trial,  on potential positive outcomes. However, there are still a number of hurdles ahead; these include durability of an antibody response, safety in larger numbers of patients, regulatory approval, and last, but not least, public acceptability and willingness to receive the vaccine.

In this up-to-date overview, COVID19 treatment tracker you can keep a track on the progress of vaccines and other treatments for COVID-19.

Blood clotting problems with COVID-19

Clinicians have been reporting that some patients with COVID-19 are manifesting abnormal clotting responses which can lead to, amongst other things, increased risk for stroke. This report  presents the clinical characteristics from six confirmed COVID-19 patients with acute ischaemic stroke. The researchers note that although ischaemic stroke has been recognised as a complication of COVID-19 (usually with severe disease), the mechanisms and phenotype are not yet understood. This small study observes that COVID-associated ischaemic stroke is usually delayed, but can occur both early and later in the course of the disease, and that some patients may benefit from early anti-coagulant therapy.

Another study has also examined this phenomenon and attempted to explain the process. Patients admitted to Yale-New Haven Hospital between 13 April and 24 April 2020 with confirmed COVID-19 were analysed and blood markers for endothelial cell (cells which line the blood and lymph vessels) and platelet dysfunction were taken .

This study reports that these markers were elevated in COVID-19 ICU patients compared to non-ICU patients with two of the markers being significantly correlated with mortality. The endothelial cells may well be damaged in COVID-19 patients by the virus and are therefore unable to regulate the biochemicals that are necessary in balancing normal clotting responses.

The effect of frailty on survival in patients with COVID-19

A study entitled ‘COVID-19 in Older PEople’ (COPE) was created in order to establish the prevalence of frailty in patients with COVID-19 who were admitted to hospital, and investigate its influence on mortality and duration of hospital stay. Frailty is defined as “a medical syndrome with multiple causes and contributors that is characterised by diminished strength, endurance, and reduced physiologic function that increases an individual’s vulnerability for developing increased dependency and/or death”.

The COPE study  is a multicentre European observational cohort study conducted at 11 hospitals in the UK and Italy. Between 27 February and 28 April 2020, 1,564 patients with COVID-19 were enrolled with a median age of 74 years. (IQR 61-83). Frailty was associated with both mortality and time to discharge from hospital after adjustment for age, sex, smoking status, and other comorbidities, exhibiting worsening clinical outcome with increasing frailty. The researchers conclude that the use of a clinical frailty scale (CFS) could be a useful addition to clinical decision-making.

Cancer and COVID-19

There are at least two studies that have been designed to analyse the characteristics and outcomes of people with cancer who also have COVID-19. The first, the COVID-19 and Cancer Consortium (CCC19) looks at the experience of patients in the USA, Canada, and Spain and assesses the association between all-cause mortality within 30 days of diagnosis of COVID-19, and potential prognostic variables using logistic regression analyses, partially adjusted for age, sex, smoking status, and obesity. This team report that patients with cancer appear to be at increased risk of mortality and severe illness due to SARS-CoV-2 infection, regardless of whether they have active cancer, are on anticancer treatment, or both.

The second report which included patients in the UK is called the UK Coronavirus Cancer Monitoring Project (UKCCMP). This study adds that recent chemotherapy use in patients with cancer before SARS CoV-2 infection was not significantly associated with increased mortality. Additionally, this study identified that the phenotype of diagnosed COVID-19 disease in over half of cancer patients is mild, but death from COVID-19 in this cohort was observed in a substantial proportion of patients. This mortality is higher than that observed in the general non-cancer UK population and is mainly driven by age, gender, and comorbidities.

Both studies are ongoing.

Digital tools against COVID-19

In the wake of the COVID-19 pandemic, there has been a surge in the development and deployment of digital public health technologies for pandemic management. Context-specific risks, cross-sectional issues, and ethical concerns are discussed in this excellent review . Flow modelling, proximity and contact tracing, quarantine compliance and symptom checkers are included and the authors propose a navigation aid to fill the ‘best-practice’ gap and provide immediate practical guidance by assisting involved decision-makers to work towards a coherently structured and iterative process.


Public Health England: Preliminary investigation into COVID-19 exceedances in Leicester: June 2020

This is a report  by Public Health England, setting out the epidemiology of a COVID-19 outbreak in Leicester (which has led to a local reinstatement of lockdown provisions). Depending on how and where COVID-19 spreads after lockdown, this will presumably be the first in a series of reports into outbreaks of infection in particular geographic areas.

The report notes that 944 cases have been reported in Leicester over the last 14 days, significantly higher than the case rate in the remainder of the East Midlands and England as a whole. Because the proportion of tests returning positive is rising, this is suggestive of a genuine increase in numbers of new infections, rather than an artefact of increasing test rates.

The reason for the outbreak in Leicester is currently unclear, and the majority of recent infections are amongst people aged 18 to 65.

And finally…..

The manufacturers of a nearly 20-year-old tech product appear to be emerging as an unlikely beneficiary of the lockdown – with people spending more time at home, the Roomba has seen a resurgence in sales, with iRobot expecting to report much stronger earnings than previously predicted .


The Roomba – back in favour because of COVID-19

3 July 2020

Posted in auto-enrolment, coronavirus, pensions | Tagged , , , , , | Leave a comment

Bloomberg calls the UK and Europe to account on local lock downs

Do they mean us?

Remember how Derek Jamieson used to make us laugh with the quaint views of overseas journalists who didn’t quite get Britain. Well this blog is deadly serious and while it is focusing on us,  it is pointing to a global issue, the link between the impact of the pandemic and the prevalence of deprivation,

The mighty Bloomberg , talking to the world, has curated a series of micro-blogs to twitter that tell a sad and disturbingly familiar story about the spate of local lock downs experienced across Europe. No doubt the message will not be lost on those in America, mindful of recent events at home. Here is the thread in full, you can read it on twitter here.














Posted in pensions | 1 Comment

Enjoy summer safely in a pub?


The slogan from a Conservative party mailing to me this morning.

There wasn’t much surety about Boris Johnson’s messaging in his briefing yesterday evening. The idea that having a few drinks in your local is a good idea is bonkers.

I burst into laughter when the Prime Minister told me that I could get a drink in a pub at 6 am. Perhaps he was thinking of his youth when students roamed my part of London, up all night to get lucky.

If I was writing this blog in the 1990s, there could be pubs in Smithfields opening their doors at 6.05 am (my time of writing) .  If I wasn’t in quarantine I could wander up past the Old Bailey to try and find that pint at dawn. Except I’d have a very long walk indeed.

pubs at dawn

Romantic as it looks, that photo, taken 800 yards from my flat,  was shot in 1961. Pubs don’t open at 6am round here any more , there are hardly any “early houses” left in Britain as this article makes plain.

The final early houses have long since outlived their earlier purpose. Even in Johnson’s student days, they weren’t serving market porters but the stragglers from the clubs , so crazed by narcotics that they couldn’t sleep.

These clubbers aren’t much to be found in these days of Covid. From the Ministry of Sound in the Elephant to the clubs in the City, the message is the same


Google search; Saturday 4th July

The clubs are closed and the pubs are closed as well. That 1961 photo was taken in the Fox and Anchor – no more a pub.  You won’t be getting a drink today in any other pubs in Smithfield Market; none are opening their doors for Super Saturday.

city pubs

Google search at 6am Saturday 4th July

As with  much else of yesterday’s “shambolic” performance, the messaging on drinking was out of touch, not just with the facts about pub opening, but with the mood of the public

The Government seem to be badly mis-reading the appetite of Middle Britain to take unnecessary risks . My local landlord told me there would be no point in opening the Cockpit until people felt safe to mix inside. I don’t have to google, I  can lean out my window and  see the Cockpit is staying closed.

the cockpit

Enjoy summer safely in a pub?

The summer can be enjoyed without a pint in our hand. It can even be enjoyed from the oncology ward of Guys hospital where I’ll be for the next few days. I can have my operation because there is now capacity for elective surgery because we have flattened the curve and suppressed the pandemic.

The public understand this and we are in this for the long haul. We will not be going to the pub because we can and the pubs round here are staying shut because they know it. Publicans don’t want to get infected any more than the rest of us.

Going to the pub is nothing to do with enjoying summer safely. There are many safer ways to have a drink.

Speaking sense – not nonsense.

As an aside, people do read what they are sent as intently as they watch and listen to the TV broadcasts.

This is taken directly from an email I have just received from a Conservative MP. It appears to come from some central source and is so badly written as to make me wonder whether the person who put it together even read it over…

We also need to continue to remember the basics, such as washing your hands with soap and water more often and for at least 20 seconds, and if you have any symptoms of coronavirus (a new and continuous cough, a temperature, a loss of taste or smell), you should immediately self-isolate and get a test. You can apply for a test by clicking here. 

Whilst these relaxations will allow us to enjoy a much more normal way of life, it is vital that we all safely by following the guidelines and keeping your distance from others so we can keep the coronavirus under control.

There is no way you can be authoritative, if you write as badly as that.

We know what we are doing.

The public are very well informed about this pandemic. Apart from a hardcore of herd immunists there are very few people who enjoy taking the risk of getting the virus.

We don’t like nonsense, we like certainty. We get Nicola Sturgeon and we don’t get Boris Johnson. “Shambolic” is Sturgeon’s word for the performance of her counterpart in Westminster, few are gainsaying her.

We get the bulletins from the COVID-19 actuaries, we don’t get drivel from Conservative HQ. Mailing us rubbish is not a public service, it is an abuse of priviledge,

The public will make the best of this summer whatever its circumstances . We are mindful of ourselves and of others, we do not need to be patronized and misinformed. 

We do not need to be told – we now know what safe is.



In case anyone thinks that in focusing on messaging, I am validating the rest of the Government’s performance, I am not. this linked in blog by James Souttar makes it clear that he sides with Sturgeon’s descriptor “shambolic”, I’ll let the numbers speak for themselves.

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So what can our past performance tell us of the future?

It is narcissistic to blog about your own tweet but I’m going to anyway!

As regular readers know, I am interested in the value I and millions like me have got for the money we’ve had paid into our pensions. I choose my words carefully, few of us save directly , most of us do it through payroll.

And because this money is paid through payroll it is part of our pay – the amount sitting in our pension pots is a combination of the money we paid in , the money the tax-person paid in and the amount it has grown since being  paid in. This is our savings experience, it is unique to us and we know very little about it.

We don’t get receipts for the money we , our employers and the tax-person pay in, nor do get a statement telling us how much our pot has grown. Instead we get statements from time to time telling us how much is in our pot.

Not only do we not know how fast our money has grown but we don’t know much about where our money has been invested. We know very little indeed about what – apart from our house – is likely to be our biggest asset


From the Institute of Fiscal Studies

But it doesn’t have to be like that. A simple analysis of your contributions received and the current value of your pot results in your unique rate of return. We call it your internal rate of return with “internal” meaning – inside you!

It’s also easy enough to work out what your internal rate of return would be if you were invested in the average workplace pension. AgeWage helped Morningstar create Britain’s first every pension index. It tracks the daily increase in price of a unit in a fund going back to 1980. By reinvesting your contributions into this index we can find out what you would have got – had you been the average person.

What is hard, what we’ve spent a year on, is how to express the return you have experienced (your IRR) with the return you would have got in the UK pension index (what we call the universal benchmark).

Recently we have been doing a lot of research involving millions of simulations to discover how most fairly to express one return against each other. The word “fairly” applies because we want the score to tell you not just the experienced return you have experienced but the experienced risk you have taken.

To investment analysts we could explain the process we follow like this.

The AgeWage score takes the IRR achieved by a member. The IRR embeds the risks actually experienced by the fund into which contributions were made. In other words, it is the member’s risk-experienced performance.

In order to produce the score, we compare this IRR with the distribution of other IRRs
which might have been experienced by the member. These comparator IRRs consider all of the risk which crystalised during the period, including those experienced by the  member.

The score does not consider risks which might have occurred but did not.

Destinations are important, but so is the journey!

During the course of your saving career, you will experience a few bumps in the road, you probably felt one in February, there will be more to come.

The way your pension fund deals with these bumps over time is your experience of risk. The longer we can measure your journey, the better we can look at the way your pension fund absorbs these bumps (experiences risks) and this is the point.

Your experience is relative to the risk you faced, not all the risks you could have faced. If you had prepared for every risk, your rate of progress would be so slow you might never have got to where you wanted to be – or could have got.

So what does past performance tell you about our future?

Well it tells us how much value we’ve got for our money and (with a benchmark) tells us how we’ve done against others. Assuming we’re travelling the same road in future, it tells us whether we’re in the right kind of vehicle or at least asks us to think more closely about how we want to travel in future.

This is important as there are huge differences between the outcomes of one pension fund against another and simply spraying your pension money across lots of little pot is unlikely to be a good idea. By consolidating pensions you are likely to pay less fees and have a more manageable way of paying yourself an income in later life.

Understanding the experience you have had from your various pension pots is a starting point in working out how to bring your pots together.

As we consider our futures, we cannot ignore the past, history is an important subject.



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Could a wealth tax fix our broken economy?

wealth coins

Britain is broke, for the second time in 12 years our economy has hit the buffers but this time the noises coming out of Government suggest that it is the wealthy who will pay to fix it. This would be in contrast to the austerity policies of the coalition, Cameron and May governments.

A recent You Gov poll found 61 per cent of the British public supported a wealth tax on individuals with assets worth more than £750,000, excluding pensions and the value of their main home.

Former Head of the Civil Service Gus O’Donnell said yesterday “there may be more of an appetite for a wealth tax than you might have thought”.

The goals of a wealth tax

The IFS start with the fact that


and that ….

wealth old 2

Wealth is increasingly associated with being old

wealth old

and concentrated in housing and pensions


Many people may have wealth tied up in assets but little income.

wealth 3

There are very few countries in Europe which still have meaningful wealth taxes and this reflect the historical fact that wealth taxes tend to be introduced after a major crisis. There have been few major crisis of late and the last one was dealt with through cuts in public services and increases in taxes on spending which hurt the poor most.

At an abstract level, a wealth tax seems to be aligned with the goal of a fairer tax system, but clearly it is a tax that will present practical difficulties to introduce.

Reasons we don’t have a wealth tax (on the living)

A large part of the IFS presentation focused on the practicalities of introducing and maintaining the taxes. In particular issues of avoidance (trusts, emigration, borrowing), valuation and liquidity.

But despite the issues surrounding a wealth tax, the IFS pointed to recent public opinion polls that suggest that we are ready to see a wealth tax in Britain for the first time (the land value tax introduced in 1909 was repealed ten years later when it was found that it was costing more to administer than it collected). The last time the UK looked at a wealth tax was under Harold Wilson’s Government in 1974.

The IFS will be looking at a final report on whether Britain should have a wealth tax later in the year.

Gus O Donnell’s arguments for considering the hard problem are

  1. That with Covid-19 we have a “clear burning platform” for change
  2. We have a Government with a big majority
  3. There is a desire withing Government for genuine reform
  4. This can only be done at a time (like now) when we have a popular Treasury

While Covid’s health impact has been on the elderly and males, the economic impact is likely to be on the young and females. In terms of “least bad options” , tax increases and especially taxes that don’t hurt those impacted, appear  to score well.

A tax on the living or a tax on the dead?

The meeting concluded by thinking about inheritance tax, a tax that has fallen into disrepute,

O’Donnell pointed out that the council tax which was brought in to replace the hated poll tax started well and has also fallen into disrepute.

According to O’Donnell, introducing a new tax (or a package of new taxes) would be easier than to reform a broken tax (where the losers would shout louder than the winners).

Whatever the solution that the Treasury choose, it is clear that it’s going to be tough. In a modern way of living, the new taxes we pay should respect the way we want to live our lives. Right now our tax system doesn’t look like it pays that respect.

Now is the time for us to talk about  the way we fund our way out of the pandemic and this was a good start to that debate.


Gus O’Donnell





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Grieving for Guy and Flora Opperman

guy opperman

Guy Opperman

People have various ways of dealing with grief, some withdraw and deal with it privately, others share their grief with others.

Our Pensions Minister, Guy Opperman has chosen to share the grief he has over the loss of his newly born twins . In reading his thoughts and in re-publishing them here, I have been touched by the humanity of Guy Opperman’s tribute. I hope that as a community  , we can support our minister and find ways to help each other.





The link to donations is here

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Public and private sector partnerships in pensions.


Mick McAteer of the Financial Inclusion Centre and Romi Savova of Pension Bee


I have a high regard for Mick McAteer, someone who’s passion is compassion. Mick fiercely believes in the primacy of the public sector in delivering pensions in the UK and he argues against private initiatives that he sees diluting the impact of state sponsored projects.

His Financial Inclusion Centre mobilizes publicly held money to be put to work for social good.


Mick’s view, as the views of others such as Jeannie Drake and Gregg McClymont inform and temper our thinking. Without the interventions of the state, we would follow the dystopian world of unchallenged capitalism which has led to consumers seeing value destroyed.

This position means that even on issues of sustainability, state sponsored initiatives are promoted and private work denigrated

I don’t share this view and though I am not an economist, I see evidence , even in this time of pandemic of the private sector delivering answers to the nation’s problems.


So let’s look at three areas where the private sector is serving the public interest

Macquarie Infrastructure Debt Investment Solutions (MIDIS) has raised £2.7 billion in commitments from predominantly UK corporate pension schemes, local authority pension schemes and insurance companies in the latest round of fundraising for its UK infrastructure debt strategy.

MIDIS raised more than £220 million via its second UK focused pooled fund targeting investments in inflation-linked debt in essential UK infrastructure businesses. A further £2.5 billion of commitments was raised to invest alongside the fund through separately managed accounts.

Many maturing defined benefit pension schemes and insurance companies have increased their exposure to inflation-linked infrastructure debt seeking to better match their inflation-linked liabilities. Investors have also been attracted to the prospect of higher returns than those offered by other assets with inflation protection and the lower risk profile of the asset class when compared to corporate debt

Insurance (pensions)

In the middle of June, Legal & General released a report called the power of pensions in which it suggested that the massive flows of defined benefit pension schemes to bulk buy out could release money that can plug the £200bn gap in funding for further infrastructure projects.


Data (dashboards)

There is a third area where the public and private sectors can work together and it is in the gathering and distribution of data sharing.

Increasingly our financial affairs are simplified by ready access to data. The open banking initiative, the general data protection requirement and the development of the Government Gateway have meant that we can gather data about our savings and out tax affairs online and do everything from paying tax-bills to consolidating pensions from our phones.

For this to happen, Government has worked with the private sector to establish protocols and police behavior to ensure that the public can do what they need to do in real time without fear.

But I fear that progress towards a goal of consumer empowerment, where people can look into their pensions and make informed decisions on where they want their money invested and how they want their retirement wages paid to them is under threat.

It is under threat from the well-intentioned but ultimately regressive views of those who want to take the private sector out of the dashboard project. Consumers have already seen promises of pension finding, data aggregation and dashboard delivery slip back year after year.

A long history of state and private sector collaboration

nigelThere is a long history of successful projects where state and private sectors have worked together to deliver good. That history continues to this day as is evidenced by the banking activities of McQuairie and the Insurance activities of Legal & General.

It is up to those on the skeptical left, Mick and Jeannie and others, to accept that the aims and aspirations of the private sector. People like Nigel Wilson, L&G’s CEO,  of Macquairie’s Alistair Yates (who shared the MIDIS fund with me) and with the data sharers such as Romi Savova of Pension Bee are not financial hooligans but business people who organise wealth to meet the needs of society. Whether this be through private sector investment or the generation of taxable wealth, the business of finance is to mobilise capital.

Those who work in public service must trust these people just as we must respect those who work to protect the public within Government. That is the way it is, has been and will be.

wilson and

Guy Opperman (Pensions Minister) and Nigel Wilson (CEO L&G)

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