The money behind annuities “matters” too!

Important research into how insurers are making the money behind annuities matter

We tend to forget that a very large amount of the money yet to be paid as pensions , is backed by funds held by insurers and that money is invested, not just in gilts but in a wide variety of income producing assets capable of meeting the promises made originally by pension schemes or by the insurers themselves, at the point when an annuity is sold.

Annuity specialist Retirement Line has started to research the annuity providers it uses to get its customers annuities.  I work with Mark Ormston to better understand what is going on and Mark has supplied me with a summary of Retirement Line’s research into the ESG initiatives within the life companies. This money matters every bit as much as the money accumulating in DC pensions (which do not invest in  annuities) and DB pensions (which sometimes buy-in annuities to reduce longevity risk)

This research is the first I have seen of its kind and I hope it will be picked up by firms monitoring the progress of insurers towards their climate goals. All too often, the high-profile flagship products, GPPs and Master Trusts get all the attention. We cannot let in house funds get left behind. Well done Retirement Line for kicking this off. Let’s hope they can use their distribution clout with insurers to drive positive change.

ESG investment considerations within annuities



Are working on pinning down by year-end some more succinct public messaging on this front, however, in the meantime, they have quite a lot out in the public domain already, eg particular asset deals where they have issued press releases (e.g. green trains, wind farms, sustainability-linked commercial mortgage loans), articles they have done in Pensions Age and the Sunday Times, their green asset investment commitment that they made in 2015 (which they met well ahead of time: they now have c. £6bn of green assets across Aviva) and their wider Aviva commitment to £10bn of UK infrastructure and real estate investment which was announced by Amanda Blanc our CEO recently.

In 2020:

Galloper wind farm

Aviva supported a UK renewable energy project with a £131m loan to finance offshore transmission assets for a wind farm off the Suffolk coast. Each year, the Galloper Offshore Wind Farm’s 56 turbines generate enough green electricity to power the equivalent of more than 380,000 British homes.

Big Yellow

Aviva lent £35m to support the Big Yellow self-storage company, including an agreement that they would add solar panels to their facilities.

Coastal Housing Group

Aviva entered into a corporate debt facility for a, not for profit housing association with 6000 homes under management



Completed a £75 million Private Placement on behalf of the Aviva UK Life annuity business with settle, the not-for-profit housing association which manages over 9,000 properties across Bedfordshire and Hertfordshire.






Canada Life

The link below that provides some info.

However, they are working on a full policy.  This will probably not available for 6 months.




This is a statement issued by Just

The United Nations has set out sustainable development goals that businesses who value sustainability have a moral obligation to align to as best they can. We will aim to make a positive difference to those goals that we can directly affect and make a concerted effort to not harm others.

Many efforts we are already undertaking across the business are aligned to these goals and contribute to our becoming a sustainable business. Some examples of these are:
–  conscious changes to our investment strategy to increase our involvement in sustainable practices and away from unsustainable ones;
– creation of the diversity and inclusion strategy that David Richardson is championing;
– continuing our efforts to reduce our own carbon footprint;
– embedding the possible impacts of climate change into our risk management activity.

Last month debt investors subscribed £250m to our first Green Bond, which suggests they have strong confidence that we are creating a green sustainable business. All of this activity should improve our Environmental, Social and Governance (ESG) credentials (the measures that others will assess us by).


Legal & General

LGR (Legal & General Retirement – the entity that conducts annuity business) consists of two parts: LGR Institutional, which transacts worldwide pension risk transfer (PRT) business, and LGR Retail, which transacts individual retirement business. LGR invests the premiums it receives in a combination of fixed income (or similar, fixed cashflow generating) assets, hedging derivatives and reinsurance contracts to provide a safe and secure cash flow which enables us to back pension liabilities. Most of the asset management services are sourced in-house through LGIM, which executes LGR’s strategic ESG objectives.


LGR has three ESG objectives:


  • Environmental impact through portfolio decarbonisation: to align with the Paris Climate Agreement, support net-zero objectives and reduce our portfolio carbon emission intensity to half by 2030.
  • Social impact: invest in assets which create real jobs, improve infrastructure and tackle the biggest issues of our time – including housing, climate change, fostering an inclusive society and the ageing population.
  • Governance: good investment underwriting requires LGR to identify and manage financial related risks including ESG.


LGR considers ESG to be a primary factor in all of its investment objectives. ESG factors are particularly important in long-term credit risk assessment because, by nature, many ESG risks are low probability and high impact.

The assets which back regulatory and shareholder capital are managed separately to the annuity portfolio. These assets are invested through Legal & General Capital (LGC) in an impact-aware and ESG-aware manner, which further diversifies LGR’s portfolio exposure in equity and real asset markets.

More details on this and L&G’s Inclusive capitalism can be found in L&G Sustainability report

and the following links are to LGIM’s ESG policies

  1. LGIM’s approach to Responsible Investing

  1. Corporate Governance and Responsible Investment Policy


Whilst ESG is considered within the investment process for the assets they hold, they do not have any specific restrictions relating to ethical investing on the mandate that controls the assets backing our annuity liabilities.


Scottish Widows

  • Don’t have an overall ESG score for the annuity portfolio investments, although they will be looking to develop such metrics during 2021;
  • They will be reporting the CO2 outputs that they finance in their annual report and working on the detailed strategy for how they aim to meet the CO2 commitments they have made;
  • Their targets of 50% carbon footprint reduction by 2030 and net-zero by 2050 in their investments cover the whole of Scottish Widows.  Shareholder assets are one part of that strategy although some areas may move at a faster pace than others;
  • For information, the largest sectors they are invested in their annuity fund are long term loans to:
    • UK Housing Associations – funding social housing
    • UK Infrastructure Projects – funding social infrastructure (schools, hospitals, etc), renewables, railways, etc
    • UK Universities – funding higher education facilities
    • UK Real Estate – with a significant investment in the supply of affordable rental properties

Annuity money matters.

Kudos to Retirement Line, an annuity broker that’s thinking beyond the usual metrics of “rates” and considering the social , environmental and governance going on with the money they broke. Let’s hope, in  time, that ESG considerations  become part of all annuity purchasing decisions.  Retirement Line work in the retail space ;  I wonder how much attention is taken by trustees when they buy-out pensioners or buy-in annuities.

I encourage Retirement Line to pick up from this start and create an ESG research lab. They are uniquely placed to help not just their customers but institutional trustees, their advisers and the Governmental departments and regulators charged with ensuring TCFD on all money in the pension system.

The more scrutiny on insurers operating in this space, the better for the planet.  Retirement Line are never shy in self-promotion – on ESG they are indeed….



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Better testing needed for a COVID-19 exit strategy – “data not dates” from Gordon Woo


By Gordon Woo for

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


Vaccines alone cannot resolve the COVID-19 crisis. We need to follow the virus, not just the disease: this requires a fully functioning NHS Testing and Tracing system (NHSTT) to contain outbreaks. New variants with increased infectiousness have made this more important.

There is reason to hope that a fully functioning NHSTT can be established in 2021. Measures recommended by SAGE behavioural scientists to encourage compliance with isolation and quarantine can be adopted, and technological advances in diagnostic testing can increase the capacity and speed of testing.

Ideally, an instant, accurate and low-cost test is needed for a robust COVID-19 exit strategy. Recent developments in aptamer research offer hope that such a test may arrive this year.

Contact tracing and quarantine compliance

Vaccines provide a welcome route for societal escape from a repeated cycle of pandemic waves, disruptive and costly lockdowns. But however efficiently vaccines are rolled out, vaccine effectiveness is not perfect, some may choose not to be vaccinated (perhaps for medical reasons), and people under-18 are not designated to be vaccinated. The containment of COVID-19 after summer 2021 needs the NHS Testing and Tracing system (NHSTT) to be fully functional, after the understandable technical and logistical challenges of starting from scratch in 2020. Otherwise, according to Prof. Neil Ferguson, there is a prospect of societal disruption until the end of the year[1].

SAGE set a high target of 80% for the proportion of contacts of each infected person who should be traced. At the beginning of September 2020, NHSTT was able to contact around four out of five cases transferred to its system, four out of five provided details of contacts, and three-quarters were subsequently reached[2]. As of mid-November, 85% of people were reached for contact information, but only 73% of their identified contacts were reached, so that the success rate of contact tracing was still only around 60%. In the last week of 2020, when 270,000 people were transferred to the NHS Test and Trace system, 68% provided details of at least one close contact, and 92% of identified contacts were reached. This last higher figure reflects an improvement in managing contacts in the same household. However, the SAGE target is far from being met.

The best opportunity for NHSTT to be properly functional is when it is not being swamped with many thousands of new cases per day. German authorities have reckoned on having five contact tracers per 100,000 citizens[3], with a manageable number of weekly cases for diligent contact tracing being around 50 per 100,000. For the UK population, this would equate to around 5,000 cases per day. The UK Prime Minister told the House of Commons on 20 May 2020 that UK would have a system capable of tracking 10,000 cases per day by 1 June. Even if this had been achieved four months later by the beginning of October, when there were 10,000 new confirmed UK cases per day, it would have indeed been world-beating. With the experience gained and lessons learned from 2020, the SAGE aspirational 80% target for contact tracing should be achievable in the summer of 2021, once the number of new cases is brought down by vaccination to below a few thousand per day.

In the ambitious UK contact tracing plan, non-compliance with quarantine was not adequately addressed. In Taiwan, where there were only 7 COVID-19 deaths in all 2020, 99.7% compliance was encouraged through financial assistance, and achieved through advanced rigorous electronic tracking of cell phone movements. In a King’s College London survey[4], issued on 18 September 2020, only 11% of UK citizens said they would comply with quarantine. Two days after publication of this study, a new UK government package to support and enforce self-isolation was announced. This included a payment of £500 for those on lower incomes, and fines for breaching self-isolation.

These measures became UK law on 28 September 2020, during the emergence of the second wave of COVID-19. This package for support and enforcement of self-isolation was needed, but came too late for containing COVID-19 in the autumn of 2020. However, this package should make a substantial contribution to mitigating the spread of COVID-19 in 2021. SAGE has suggested this support package might be more generous for less affluent households[5].

Another measure, advocated by SAGE, is the facility for those tested positive to isolate away from their households in special quarantine centres or hotels. This would be especially helpful in poorer districts, with high population density and many multi-generational households. 6% of UK households, a total of around 1.8 million people, are multi-generational. One such district at higher risk is the London Borough of Newham, which has 70% BAME population[6]. In the week to 2 January 2021, there were almost 5,000 confirmed cases of COVID-19 in this deprived borough: the highest figure in London. Quarantine centres for those tested positive for COVID-19 have been successfully run in a number of countries, including China and Israel. Sir David King, leader of Independent SAGE, has pointed out the value of quarantine hotels in New York. Such facilities cut household transmission and would contribute to containing the urban spread of the new variant of COVID-19 in 2021, as well as serving to mitigate the excess vulnerability of BAME communities.

Accurate and affordable testing

One of the principal obstacles to effective digital app-based contact tracing is the requirement to self-isolate for ten days from when there was last contact with the person tested positive for COVID-19. It has been suggested that this self-isolation order should hold only until an individual has been tested negative by the public health authority. A UK survey has indicated that 90% of people would likely comply with self-isolation if there were a rapid test available[7]. This contrasts starkly with the 11% figure above from the King’s College survey. For someone with no symptoms to stay at home when they could be earning a living or looking after their family is clearly difficult, and creates a dilemma for them. But with the reproduction number of the new UK variant being materially higher, compliance with self-isolation needs to be raised to 90%. Rapid testing is crucial for this to be achieved.

The general availability of accurate and affordable testing would boost compliance and increase the effectiveness of NHSTT enormously. Consider air travel for example. Instead of the honour system of expecting arrivals to UK to self-isolate for ten days, (which has often been treated as discretionary), as of 15 January 2021 there is a requirement for travellers to UK to have a negative test before departure. Since the discovery of the new more transmissible UK variant, US citizens returning to USA are required to have a test within 72 hours of departure.

This is now perfectly viable in January 2021: an accurate PCR test delivers results in a day and costs £80 at Heathrow. As of 15 February 2021, concern over the spread of the South African and Brazilian variants has led to the introduction of quarantine hotels for many arrivals in UK. Those quarantined will be tested on the second and eighth days of their self-isolation.

Faster and cheaper, but much less able to detect low levels of infection, are lateral flow devices, which can display point-of-care results in 15 to 30 minutes, without the need for laboratory processing. These tests look for protein antigens which live on the surface of a virus. Tests cost between £5 and £20. Lateral flow tests form the basis of the UK government’s “moonshot” programme of mass testing[8], rolled out across England. They are also being accepted for travellers to UK.

During the periods when some UK restaurants were open, subject to social distancing, instant temperature checks were introduced by some COVID-secure establishments. Had one been available, an instant, accurate and low-cost COVID-19 test would have allowed such restaurants to open fairly normally. At a cost of a few pounds per person, many other public venues, including theatres, concert and convention halls and stadiums, might also resume normal function.

On 7 December 2020, the game-changing prospect of an instant, accurate and low-cost COVID-19 test came a little closer to reality with a press release from the Canadian company, Two-Photon Research (TPR). Montreal-based TPR has used its expertise in light sciences, optics and microbiology to develop a radically new solution for virus testing: Aptamer Molecular Photonic Beacon (AMPB)TM. Aptamers are a special class of short nucleic acid molecules that fold into 3-D shapes, capable of binding with high affinity and specificity to a target molecule. TPR’s diagnostics platform works by binding aptamers to the S1 protein in the spikes on the surface of the SARS-CoV-2 molecule. The aptamer’s shape is changed so that it complements a chain of atoms in the S1 protein, rather as a key matches a lock. By changing the AMPB aptamer and finding the right shape, multiple viruses or virus mutations could be detected with a single test.

The AMPB is placed in a 4 ml vial where it will bind with the virus’s S1 protein – if it happens to be present in the saliva sample of the individual being tested. Light emitted by the AMPB is detected by sensors that convert light into electric signals. Such sensors are contained in a smartphone camera and activated via an app. A green icon pop-up on the smartphone screen instantly indicates a negative result; a red icon indicates a positive result. The time and GPS data for the test are stored with the result, and can be communicated electronically to health authorities. The centralisation of test data would be a huge benefit in tracking the spatial-temporal evolution of the virus. A five-vial test kit is estimated to cost around £25, which would make daily testing feasible for many people.

TPR has completed in vitro testing of its technology, and the accuracy has been shown to be as good as a PCR test. In vivo testing is due to begin in January. There is no guarantee that AMPB will be available in 2021; other aptamer-based testing initiatives have missed progress milestones. However, an instant, accurate and low-cost COVID-19 test, whenever it is available, should be part of a robust COVID-19 exit strategy, to complement the mass vaccination programme. Furthermore, as with the new plug-and-play vaccine technology, this new instant diagnostic technology would be a crucial component of future pandemic risk management, and also crucial to the long-term insurability of pandemic risk.


16 February 2021

[1] BBC Panorama (2021) 11 January.

[2] Briggs A. et al. (2020) NHS Test and Trace: the journey so far. Health Foundation, 23 September.

[3] BMJ (2020) Lessons in contact tracing from Germany. 25 June.

[4] Smith L.E. et al. (2020) ICORSAIR study, King’s College, London,, 18 September.

[5] Susan Michie, behavioural science team at SAGE. January 2021

[6] Newham London

[7] Abeler J. et al. (2020) Support for App-based contact tracing of COVID-19. OSF preprint.

[8] Iacobucci G. (2020) COVID-19 government ramps up “Moonshot” mass testing. BMJ, 17 November.

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A year of staying safe – statistics show how we survived 2020 (and will 2021)

The latest statistics from the CMI show that were it not for COVID – 2020 would have been the year of “staying alive”

You may remember that at the start of the pandemic, when many Covid-19 related deaths were not being recorded (as such), “excess deaths” were running ahead of Covid deaths and now it’s the other way round, that’s because we had a remarkably healthy year in 2020 – Covid aside.

This is surprising as you’d have thought that the strain on the NHS would have led to more patients without Covid dying sooner.

What we’ll have to wait for is whether the long-term impact of  Covid will feed through in an upswing of deaths in 2021 and 2022 from conditions under-treated in 2020. But right now these numbers seem to show that not only did our health service cope with the pandemic, but it ddn’t stint on its non-Covid duties, despite the record 10m that Reform claim could be on hospital waiting lists later this year.

Let’s deal in facts and not speculation.

The facts of infections , admissions and deaths today.

The lockdown is clearly working, the public’s behaviour is relieving the NHS and the NHS is relieving the public. This is a good news story which will be supplemented by the positive impacts of the vaccines. Are these already being experienced in lower infections and hospital admissions?

And the R rate is steady too with a prospect of becoming redundant as the impact of vaccination kicks in, requiring an R  (1.1)

<blockquote class=”twitter-tweet” data-conversation=”none”><p lang=”en” dir=”ltr”>Our estimate of &#39;R&#39; remains at around 0.75, based on recent admissions.<br><br>We expect the fall in older age admissions due to vaccinations will soon break this assumed link with overall community infections, at which point we will discontinue reporting this estimate.<br><br>2/4 <a href=””></a></p>&mdash; COVID-19 Actuaries Response Group (@COVID19actuary) <a href=””>February 16, 2021</a></blockquote> <script async src=”; charset=”utf-8″></script>

What this adds up to is a “weathering of the storm” for which we jointly and severally should be feeling proud of ourselves .

Of course the news stories continue to focus on illegal partying and occasional fines for anti-social behavior, of course radical think tanks talk of the breakdown of the NHS, but the evidence is that this is the NHS’s finest hour and it is the general public who have helped bring admissions and infections to a point where the NHS may see light ahead.

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Pension trustees -you can’t buy a sausage with a brick!

There is an interesting article in  the FT which has sparked quite different reactions from people I know. Here is it’s presentation from Jo Cumbo, who has strong views on investing other people’s money for social purpose. It’s Jo’s article.

For those without an FT subscripion, what Richard Tomlinson – the LPP CIO – is saying is that if you’re investing in illiquid investments to get extra return because you don’t need the money back, then you may have missed the boat. The “illiquidity premium’s” boat sailed when QE flooded the market with so much cash, demand for liquidity dried up.

My friend Con Keating explained this to me

It is the price of liquidity which matters. The effect of QE has been to drive down the price of liquidity – among other things that is the explanation for the decline of dealer bond inventories – with liquidity this cheap, it does not make sense for banks to create it.

In other words, you will earn very little, if anything, extra from buying illiquids today.

Incentives are not always a good reason to buy

Short term incentives such as “buy one get one free” or a simple discount to the RRP often seem tempting and lead to piles of unwanted goods at the back of the cupboard which (in our household) get recycled through charity shops. Buying cheap and selling cheaper is not a good economic model and it’s one that Jo has warned me against (among many things Jo is a thrifty housekeeper)

Jo is  uncomfortable with the headlong push by the Government into encouraging DC pensions to invest more to help the economy rebuild. She thinks this is complicated for DC and she worries that  the recent Pension Schemes Act now puts a fiduciary duty on trustees to act in the best interests of the environment.  For Jo, there are tensions and conflicts of interest here which need to be challenged and fleshed out.

Of course in pensions, the incentive to tie up our cash in a scheme where we may not see it back for over 40 years is already incentivized by the tax system. Although it doesn’t always quite work, the EET taxation system where we get taxed on the benefits and relief on tax we would have paid on contributions and investment returns, provides an interest free loan from the Treasury from tax deferral, 25% of the loan is written off at the end of the investment period – long term saving is already incentivized wherever the money goes.

But that does not diminish Jo’s point , just because the capacity to invest has been boosted by tax relief , shouldn’t make you any less diligent in investing, especially when you are investing other people’s money. Incentives should not be the reason to buy, and too often they devalue the money used to make the purchase.

The case for purchasing and holding illiquids  has to be fundamental

If we can no longer buy in the sale, it doesn’t mean we cannot buy. Richard Butcher makes a number of good points in a sharp tweet.

Con Keating points out that for those who bought illiquids when they were discounted, holding those investments is as good an idea today as it was when the investment was made. The fundamental case for illiquids is that they generate long-term value and investors shouldn’t look to bail out because they fear a “Woodford” or because they can crystallize a quick profit from the discount they got when they purchased the asset (s).

The second point is that the illiquidity premium is fixed by the acquisition cost. (I am ignoring the possibility of sale prior to maturity, but these are illiquid or “not traded” instruments) That means that there is nothing incongruous about holding a portfolio of illiquids which were acquired in more normal times when there was a premium for illiquidity.

Trading is not investing, “cashing out” rarely works

I am reminded of a betting analogy. It is now possible to bet on a horse either before the start of a race or “in running” and “cash out” your investment, prior to the horse winning or losing. Quite often you can make a quick buck doing this, but over time you will end up losing, because you cannot see what the naked eye can see, the progress of your horse in real time. People on course, who make the market are typically two seconds ahead of those on their laptops or phones and so the punter is always trading with imperfect information.

There is not full transparency in the market as you are betting against someone who has better sight than you. So you will lose more than you win. The analogy with illiquids is obvious, you are the best over time to let your horse finish the race, or your investments run their full duration.

This is why the trading strategies of hedge funds, quant funds and even the multi-strategy DGFs like GARS have not really caught the pension world’s imagination (or money). Trading on complex algorithms they are at the other end of the spectrum from the patient capital of illiquids. No matter how good the idea behind the strategy, there will always be someone 2 seconds ahead of you, who will seek to exploit better trading information.

The value of paying for proper investment management

Another friend, Paul Stanworth, who for a time was CIO of Legal & General’s internal funds spoke with me about how little expertise there is in this area of investment.

It worries Richard Tomlinson (and Jo Cumbo)  that the UK government consultation document in 2019 said that by investing almost wholly in highly liquid investments, such as listed equity and debt, pension funds could be missing out on the illiquidity premium.

Paul’s comments were directed at those in Government who simply see the investment in an asset class as a socially responsible thing to do and therefore blindly trust the market will incentivise that investment through a mechanism that is no longer needed (the illiquidity premium).

Paul’s point is Richard Butcher’s point, there needs to be expertise behind infrastructure investment and not speculation. A point well made in one of the comments to the FT article which broadens the debate to the transparency (or lack of it) in private equity.

Fees are negotiable but only where the buyer has skill and expertise. They form part of the fund manager’s value add which is very much about managing the initial transaction which often appears to be badly executed,

The poor execution that Paul mentioned to me is not of course the same thing as flagrantly exploiting the lack of transparency of many illiquid investments, for private equity read Woodford and in extremis the long tail of retail investment scams.

Perhaps the final word should go to another commentator on Richard Tomlinson and his comments.

Once we have accepted that DC pension funds can invest in illiquids , we move on to the next questions – “should they?” and if so, “how?”.

A DC/CDC footnote.

Although I am a fan of patient capital, I am minded of its impact on many DC funds right now. That many people are in drawdown strategies that include “gated” property funds either purchased directly or forming part of defaults, tells me that not all the risks have been through through, or even considered.

Jo Cumbo is right when she tells me

There are tensions and conflicts of interest
which need to be challenged and fleshed out.

We need to remember that DC funds are for individuals who will eventually want their money back. Unless the aim of the fund is to create a family office wealth management service (for future generations), all DC investments will need to be redeemed.

Unless of course the scheme is collective and truly open-ended.



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Pension comparisons need not be invidious.

In two recent posts I took a helicopter view of the new pension legislation that received Royal Assent earlier this month. I look first at how the Pension Schemes Act 2021 will be remembered by pension historians and what it sets out to do – consolidate and simplify our private pensions.

In this post I look at the Government’s favored measure ,to help consolidation take place- value for money (VFM for short). I look at the work going on at the regulators in creating a new framework for VFM and look at how such a framework could be used in practice.

The DWP, FCA , TPR and the Work and Pensions Select Committee have all called for a common definition of value for money but only the FCA has so far produced one. The FCA have stated their intention

To provide a clear direction for IGCs, we propose to introduce an explicit definition of VfM. In developing a definition, our aim is to make this specific to the role of the IGC and to align it with TPR’s DC code. This definition would be set out as guidance in our handbook.

In its consultation paper “Driving Value for Money in Pensions” (CP20/9), the FCA make a tentative attempt at the definition

The administration charges and transaction costs borne by relevant policyholders or pathway investors are likely to represent value for money where the combination of the
charges and costs and the investment performance and services are appropriate

It may be tweaked but this looks like the basis for a new simplified VFM framework. But this framework is not proving universally popular.

Opposition to comparing different DC pensions.

The FCA’s also suggest in CP20/9 that IGC’s identify failing employer schemes , write to them and compare them with alternative workplace pensions.

We think it is difficult to conduct a meaningful assessment of VfM when an individual provider’s schemes are reviewed in isolation. A review of other options available on the market can provide a point of reference, and may provide better value for scheme members

I understand that the FCA has received several representations arguing that  comparisons are  invidious and potentially misleading. They argue that simplifying value for money to a point where it can be used to compare different types of workplace pensions, is not practical and could be misleading;

The FCA have told me  they are not minded to back down from the position, indeed they told me  they were working with TPR on the consultation response which is delayed till the second quarter of 2021

Should we protect the diversity of VFM definitions?

To date value for money assessments  have  focused on technical details such as cost and charges ,compliance with service standards and complaints. Each IGC and Trustee Chair has had the freedom to create their own VFM framework

A great deal of time and effort has been invested in these bespoke frameworks. They have involved  institutional measures aligned to how providers measure themselves. These assessments have been based on the FCA’s requirement to

whether the default investment strategies or pathway solutions are designed and undertaken in the interests of scheme members or pathway investors, and have clear statements of aims and objectives
• whether the firm regularly reviews the characteristics and net performance of investment strategies or pathway solutions to ensure they align with the interests of scheme members or pathway investors and that the firm takes action to make any necessary changes
• whether core financial transactions are processed promptly and accurately
• the level of charges scheme members or pathway investors pay
• the direct and indirect costs incurred as a result of managing and investing, and activities from managing and investing, the pension savings of relevant scheme members, or, the drawdown fund of pathway investors, including transaction costs

I can quite understand why IGCs are unwilling to move to a new framework. But move they must. Basing VFM assessments on these measures  alone makes it hard for employers (let alone savers) to make meaningful comparisons as each scheme sets its own benchmark and marks its own homework.

We at AgeWage think that important as these factors are, they are only elements of good pension governance and not the framework for explaining value for money. We need something simpler and more intelligible to ordinary people. Above all we need something consistent that allows employers and savers to compare one scheme with another – and  one pot  with another.

The current diaspora of VFM frameworks make it impossible for employers or savers to make choices. Pension comparisons need not be invidious, we need a new framework for VFM.

The new framework  the FCA are proposing for VFM

The FCA  propose to introduce a common definition of VfM and 3 elements that
IGCs must take into account in a VfM assessment. These elements are costs and charges, investment performance and quality of service

For GPPs to be compared with trust based schemes, employers need a common means of comparison for  both value and money. In our view such commonality is best measured by the internal rate of return (IRR) achieved by each saver. The IRR shows the achieved investment performance net of costs and charges.

Quality of service can be measured by the quality of data and this can  be assessed by considering the  plausibility of the data (do the IRRs make sense?).

We argue that while the complex VFM constructs advertised in IGC Chair Statements do a good job in helping IGCs measure VFM on their and their providers terms, they do not serve the greater purpose of helping employers and savers work out what good looks like.

We agree with the FCA that a new VFM framework is needed, it should simplify the assessment and focus on the three elements that form the common definition

What does good look like? – the need for comparability.

So what does a good IRR look like and how can we identify an implausible IRR?

What is needed is a benchmark, a common comparator which defines what good , bad and average is. Such a benchmark exists in the form of an index created by Morningstar that defines the average return a DC saver in the UK would have received since 1980.

Comparing actual IRRs with the synthetic IRRs arrived at by investing contribution histories in the benchmark fund allows each scheme to be measured for the excess value it has given savers/members over time. This can either be measured as a monetary amount of as a score – providing an algorithm can be created that takes into account out performance over time.

Analyzing contribution histories using an actual and synthetic IRR, not only shows defines the value created or lost but gives a metric for suspect data where the difference between the IRR and the synthetic IRR is implausible.

The answers to the questions of what good looks like and how we can define VFM so that it provides a common comparator, are to be found in the data of each employer scheme.

Ironically , the answers are startling simple and easy to demonstrate, all that is needed is access to data – something which IGCs have no problem getting and a standard way of analysing it.

If it’s that simple, why has no one tried it before?

A system of marking  VFM based purely on measuring returns has two fundamental challenges

  1. It offers a view of the past which cannot be relied upon to be mirrored in the future
  2. It is dependent on consensus that the benchmark is representative

The first challenge is fundamental to any outcomes based definition of VFM, but it addresses the concern of savers who in the 2017 NMG research commissioned by IGCs made it clear that what mattered most was the outcome of their saving. This may be a “populist” approach but it should have the advantage of being “popular” with the people IGCs are there for.

The second challenge is peculiar to fiduciaries  for whom the benchmark does not represent the investment strategy of their ideal default. Clearly most defaults will not replicate the investment strategy of the default and this will be one of the reasons schemes provide more or less value for money invested.

Other factors include costs and charges, the sequencing of contributions and the demographic of the scheme members where dynamic strategies such as lifestyle are in place. No two schemes are the same but they share a common objective, to maximize outcomes.

Practical measures that allow comparisons to be made.

We have proposed a common benchmark , the  Morningstar UK Pensions Index, (UKPI), It was designed specifically to represent the average fund but  will not represent all funds or all life-stages of a member’s use of the default fund. The  UKPI is 80% invested in growth  and 20% in defensive assets, most funds will have different weightings , aiming to take more or less market risk. Some fiduciaries will want to measure value per unit of risk taken.

It is possible to measure value for risk taken by analyzing data and we supply this measure to our clients on request. It is a measure of the skill of the designer of the default but it is not as easy to compare as a measure of nominal returns, nor as easy to explain.

We need to accept that any common definition of VFM will be retrospective and will not take into account value for risk taken. but this should be set against an important consideration which in our view outweighs both challenges. The measure proposed , based as it is on outcomes, takes into account all identified risks whether supposed or realized.

For instance, a member insured against the increased cost of annuity purchase by lifestyling into bonds may be insured against a risk he/she will never take while someone invested in equities in the later stages of accumulation may be insured against inflationary pressures if the fund is left to grow. It is simply not possible to get the right benchmark for every saver (unless savers intervene and choose their strategy – as perhaps they will with investment pathways.

We have to start somewhere and the UKPI is that “somewhere”, no doubt it will change, adopting factor based indexes may be such a change, but until it is challenged, it remains the only pretender to a common benchmark and the AgeWage algorithm and score the only pretender to a common definition of VFM.

Towards standardization

The UK private pension system is very complex and can only be simplified if simple measures are implemented. Necessarily standardization means losing the diversity of VFM definitions in IGC and Trustee Chair Statements and adopting a standard approach.

Our view is that what Government needs is the VFM framework proposed by the FCA and it needs to be reinforced by a VFM standard that enables VFM to be compared between schemes and indeed between pots. We believe that any pot that can offer an IRR that looks plausible against a benchmark can be assessed for VFM, pots that need to be excluded are those with short durations, those with safeguarded benefits and pots where data is suspect (which may fail the VFM assessment for showing a poor quality of service).

Creating a VFM standard would be easier than establishing prescriptive regulations. Standardization would mean that any employer or individual could apply to know the VFM of their pension pot and we would expect in time, that the standard would be used to create VFM assessments disclosed on pension statements alongside the value of the pot the internal rate of return and the amount deducted from the pot for costs and charges.

Standardization will only happen if people are prepared to accept that simplification is needed and that requires trade-offs between delivering something that can be delivered intelligibly and to scale and ensuring that people are not misled.

It will require bold thinking and bold implementation. Until recently, I thought this could not happen, but I sense a change in Government arising perhaps from seeing how we have coped with the pandemic. Britain needs a strong and stale private pension system capable of not just providing pensions but helping Britain towards its sustainability goals.

We can get there but we need to grasp the nettle and now we have the chance to do so!


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Too many schemes, too many pots, too little pension!

We need to sort out pensions and we pensions need to sort out the climate. These are the challenges we face and I’m pleased to see Government is on to them!

Over the weekend , I tried to put the Pension Schemes Act 2021 in some kind of context. Its big ticket items, dashboard, CDC, powers to the Regulator are nuancing what we have before, the mandating of TCDF reporting is new and not introduces the idea of a pension fund  as a responsible investor.  There really isn’t time for us to have the debate (which should have been had long ago) , the Government has decided that making our money matter (in terms of reducing carbon emissions) is not a discretionary task for trustees, it is what they are gong to have to do over the 30 years leading to 2050.

There is a secondary agenda to the reforms and it sits behind almost all of the measures outlined above. The Government is well aware that pension wealth and pension  income are  too fractured, complicated and inaccessible to make sense to ordinary people. They are told they need to take financial advice but financial advisers don’t want them as clients. People are told they can see their pensions online but struggle with government gateways, logins and passwords and often the information they need isn’t even online.

There is so much money, so many pots , so many schemes and such little help that many people struggle knowing where to start and how to construct their living wage in retirement.

stats collated by AgeWage

“Targets” miss the point

For as long as I’ve been advising, and it’s getting on for 40 years, we have seen retirement planning as a process where you start by working out what you need , find out what you’ve got , calculate the shortfall and work out what you need to save to hit your target income.

This is still the best way of going about things, but it’s very hard. People’s older pension pots are with insurers under new owners, new names and the chances are they know less about you than you do about them.

Savings you made through your employer need you to trace the employer and often who they gave your money to. If you can remember and locate your pot, you have still to go through the process of finding out what you can do with your money, which is neither consistent or easy. Most employers don’t pay pensions and have little interest in you, if you’ve left them.

Add to this the lack of certainty around defined pension schemes where inquiries are now likely to be met with a barrage of warnings not to transfer and caveats about the pension promise that might be impacted by obscure adjustments to do with “GMP equalisation”

There is too much choice, too many schemes and not enough information and advice to go round.

Will the Pension Scheme Act help?

I predict that consolidation will happen  at three levels – “scheme”, “pot” and “retirement income”. The need to combat Climate Change will accelerate this change

Pension schemes will consolidate

The Government seems to be losing its patience with the pension industry that shows no interest in getting its act together and helping the consumer out.

Conversations I’ve had in Whitehall, Stratford and Brighton suggest that the secondary regulations that will follow the Act will make life uncomfortable for those providing pensions that cannot demonstrate they are offering “value for money”.

With the inclusion of the new purpose of saving the planet, that now includes compliance with TCDF and probably a number of further interventions as trustees, fund managers and platform providers are required to steward the assets they invest in with ever greater vehemence. This will drive consolidation of pension schemes.

The proposals in the FCA’s CP20/9 consultation on value for money introduce the idea that employers have the right to know the value they are getting for their and their staff’s money and while the proposals so far focus on employer sections of GPPs, GSIPPs and Group Stakeholder Plans, it looks inevitable that these proposals will spread to the master trusts whose assurance framework is getting tougher. VFM reporting , and especially VFM benchmarking, will drive consolidation of pension schemes

Pension pots will consolidate

And it seems certain now, that we will have the infrastructure in place for pension dashboards to happen. By infrastructure, I mean “open pensions”, that system of data flow that replicates open banking and allows people to see information about their personal assets and future promises from the people who keep your records and manage your money. The question is not whether but when, and when we can see this information, we need a means to act upon it, managing our pots for ourselves, seeing our pension rights in one place and maybe even getting to the point where we can do the shortfall calculations in real time. The pension dashboards will drive consolidation of pension pots

And the Government are looking to the future to create new primary legislation that will reduce the number of very small “micro-pots” through simple ideas like “member exchange” where pots below a certain size are transferred in bulk from one provider to another so that in time , people start thinking of one provider as managing their money.

If this works for micro pots, the Government looks likely to create more ambitious schemes where money moves when people move jobs either to a “master pot” or to the next employer’s scheme. This will drive consolidation of pension pots

Retirement income will consolidate

Most of us spend our working days dependent on income from one or two sources and it’s odd that we expect people to manage in retirement getting paid income from a variety of sources. Those who have a portfolio of DB pensions are few (and lucky!) but those with multiple pension pots are many (and unfortunate).

Pot consolidation is likely to be driven by the need for income from a single source. We see annuity brokers consolidating many pots into a single annuity plan paying one stream of income and I suspect there is demand for this service elsewhere in the system. Typically this is where advisers have scored with their capacity to find , advise on and ultimately manage the income through vertically integrated wealth management.

But there is not capacity for advisers to do this for people with smaller pots which in total aren’t worth more than £100,000 (most people).

So far master trusts have focused on consolidating themselves and more recently consolidating occupational pension schemes. But they have not yet focused on consolidating member pots. This is because master trusts so far have been focusing on building pots up , not on providing pensions to people who want their money back.

But they are uniquely placed to offer scheme pensions (rather than collective drawdown) by pooling people’s retirement pots into one big pot and paying pensions from that pot based on the collective life expectancy of those choosing to be in the pool. This is the most likely application of the CDC legislation , in my opinion.

Curiously this puts master trusts into the same role for individuals , as the new DB superfunds are for DB schemes, leveraging the opportunities to bulk administration, investment and advice into collective arrangements with much lower capital requirements than bulk or individual annuities.

These super consolidators can take advantage of the opportunities they get from being occupational pension schemes rather than insurance companies and become a new kind of mutual, whose principal function is to pay pensions, with varying degrees of guarantees surrounding the pension promise.

The current legislation for CDC and the secondary regulations which are to follow will see DC consolidation at the point of retirement. Meanwhile the emergency regulations for superfunds and the likely primary regulation in the next pension bill , will see consolidation around retirement income

In Conclusion

The long term direction of UK pensions is towards a simpler framework where people get a better understanding of what they will get and find it easier to get their money paid back to them as a pension.

Many people will choose to opt out of this simplification and into the flexibility of pension freedom, especially where they have the capacity to afford advice. The wealth market is already fully formed , driven by firms such as SJP and Hargreaves Lansdown and strengthened by a large number of IFAs using platform technology to manage individual wealth to individual specifications.

Mass market solutions will emerge and (as this blog is showing) are emerging with schemes , pots and retirement income all set to consolidate in the next few years.

Right now the mass- market is only semi-formed and the Government’s task for the remainder of this parliament is to create the conditions where consolidation increases to a point that ordinary people get back confidence in pensions.

We will not go back to employer sponsored DB pensions, but scheme pensions paid by master trusts, small pots consolidated by master trusts, wealth management and insured workplace pensions  and small schemes , consolidated by master trusts and superfunds, should make for a less complex and easier pension landscape as we move towards 2050.

Footnote; Climate Change is the final driver of consolidation

2050 is the new pension horizon and over-arching everything else is the need to get the trillions in UK pensions moving the dial on climate change. The final driver for consolidation is the need to create leverage on the assets that determine our carbon footprint and this will also drive consolidation – this time around a common desire for change

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These stats show why we’re locked down.



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How will history remember the Pension Schemes Act 2021?


The Pension Schemes Bill received Royal Assent last week and is now enacted. Though assent is a formality, it draws the line in the sand. “What is changing”  is now “what has changed” and the work of Guy Opperman has converted into tangible results.

It’s worth comparing this Act to what has come before, thanks here  to Wikipedia

The early 1990s established the existing framework for state pensions in the Social Security Contributions and Benefits Act 1992 and Superannuation and other Funds (Validation) Act 1992. Following the highly respected Goode Report, occupational pensions were covered by comprehensive statutes in the Pension Schemes Act 1993 and the Pensions Act 1995.

In 2002 the Pensions Commission was established as a cross-party body to review pensions in the United Kingdom. The first Act to follow was the Pensions Act 2004, which updated regulation by replacing the Occupational Pensions Regulatory Authority (OPRA) with the Pensions Regulator and relaxing the stringency of minimum funding requirements for pensions, while ensuring protection for insolvent businesses.

In a major update of the state pension, the Pensions Act 2007 aligned and raised retirement ages. Since then, the Pensions Act 2008 has set up automatic enrolment for occupational pensions, and a public competitor designed to be a low-cost and efficient fund manager, called the National Employment Savings Trust (or “Nest”).

The Pension Act 2014 was the culmination of Steve Webb’s work within the coalition Government and will chiefly be remembered for reforms of the state pension which was simplified by providing  for a new single tier State pension to be implemented on 6 April 2016. It abolished  contracting-out , increased State Pension Age from age 66 to age 67 between 2026 and 2028 and  a new statutory objective for TPR.

But the framework  put in place  to introduce automatic transfers for  members of workplace pension schemes (pot follows member) was not followed through , nor the vague promise for collective pensions and many of the minor changes around cost disclosures and administration charges on private pensions have proved unsubstantial outside the pension bubble.

How does the Pension Schemes Act compare?

The first thing to notice is that this is not an act about state pensions. It is an act about pension schemes and mostly about private pensions. The driver for Steve Webb’s pot follows members was a single view private pension and this has been replaced by the pensions dashboard providing a technological fix more in line with the spirit of pension freedoms.  The dashboard is infact a DWP inheritance from the Treasury.

The second thing to notice is that the Pensions Regulator is being empowered to control defined benefit pensions with considerably more force. The Act acknowledges for the first time that – at least in the corporate sector – sponsoring the accrual of guaranteed pensions will in future be rare.  The Act gets headlines for draconian powers against malfeasance but this is window dressing. How the Pensions Regulator uses its new powers will continue to be a major cause for debate and consultation.

The third and perhaps most surprising inclusion in the Act, is the proper facilitation of CDC. Steve Webb threw CDC into the 2014 mix but it didn’t last long when a new Conservative Government arrived and it would have almost certainly have been buried were it not for Royal Mail’s settlement with its unions that ensured both sides could agree on pensions. Such is the importance of Royal Mail’s 145,000 workforce and the service they provide, that a Conservative Government have embraced a very left-wing collective solution. The questions are whether CDC will be adopted elsewhere and why.

But probably the most momentous aspect of the Act is likely to be the requirement on all funded workplace pensions but especially master trusts and large own occupational schemes to properly disclose the impact of their investments on the sustainability of the planet. TCFD disclosures became part of the Pensions Act late in the progress of the Bill but unlike the late provision of the 2014 Act,  the strategies for improved ESG were properly thought through.

The Pension Schemes Act is quite different from its immediate predecessors in focusing not on state but private pensions, for delivering developed solutions to issues around  privately sponsored pension guarantees and in introducing a new way of looking at pension funds – as agents of environmental , social and governmental change.

How will it the Act be remembered?

Pension Ministers are iconoclasts, they have their own niches and plough their own furrows, The 2014 Act was Steve Webb’s and reflects his interests and the 2021 Act is Guy Opperman’s. With respect to Ros Altmann and Richard Harrington, neither had the appetite or command to impose their personality on pensions as Guy Opperman has. This Act will be remembered as Opperman’s , as 2014’s was Webb’s and 2008’s was the Pension Commission’s.

In terms of direction, the Act steers Britain away from a focus on state pensions and emphasizes the importance of workplace pensions following the introduction of auto-enrolment. The Act responds to the Treasury’s empowerment of individuals to spend their pensions their way, by mandating the provision of pension information on  technologically advanced dashboards;  it also opens the door to pension schemes to provide scheme pensions collectively through CDC.

Finally it shows a determination from Opperman and the DWP to play an active role in Britain’s contribution to climate change targets through the mandating of TCFD disclosures. The radical intervention into the purpose of funding pensions is what the Pension Schemes Act will be best remembered for and the odd thing is that it has very little to do with pensions!








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“The best use of our resources”


This article is from Dave Brooks ( @pensionsdave) ,Technical Director at Broadstone. It was originally published here. It is a good contribution to the debate which has raged on this blog. 

The trickiest balancing act that The Pensions Regulator (TPR) is forced to try to perform is ensuring that the three participants in the scheme funding zero-sum game are treated equitably. The interested parties are:

  1. Members’ scheme benefit promises
  2. The Pension Protection Fund (PPF)
  3. Employers with their “sustainable growth” aspirations

It is clear that, when considering a framework to support any single one of these parties, one or the other is in direct conflict. I don’t envy TPR having to balance all of this.

However, there has been much commentary on the impact of the funding code and an anticipated race to de-risk (I prefer Jo Cumbo’s more alliterative dive to de-risk). TPR would rather be in a position where pension scheme deficits no longer swing as much as they have over the past decade, seemingly impervious to the contribution that sponsors have pumped in. Reaching a more stable position could be a long and difficult/expensive process for many schemes. And by “schemes” I mean the collective of members, trustees and sponsors. The majority of the pain will be expected to fall on the sponsor during that journey. However, this blog isn’t about that journey per se and its impact on employers, but rather the other two riders on the metaphorical see-saw, the PPF and the members (my son decided they’re called see-sawers).

I think we can agree that the impact on the funding code means that employers will have to pay some extra billions into their pension schemes over the next 10 years. Picking a number at random let’s say this is £60bn over 10 years (who knows what the number actually is). We have to consider whether we’re happy that the money spent is improving the position for everyone (our see-sawers).


Will this level of contributions significantly reduce future claims against the PPF? Many employers will be expected to pay an accelerated rate of deficit recovery contributions under the new Code, which may well prove too much for them to bear and some of these employers will fail. Jobs will be lost and other trading partners will be adversely affected. Is this a desired outcome when prioritising protection of the PPF? Is it necessary, and crucially, will it improve member outcomes?

Members’ benefit promises

How much additional benefit security is provided for those extra £bns? Put simply, how many members would get more than they otherwise would? Consider the outcome in which employer and scheme continue, with a Target End State of PPF+ (at worst) or full buy-out (at best) vs employer failure with PPF compensation. In the latter case, members will simply receive the same benefit regardless of the funds paid in. Before encouraging more funding for the sake of it, can we estimate how much, overall, will be gained for members? Probably not, but understanding how much we can expect member outcomes to be improved overall by our £60bn of accelerated contributions is an important consideration.

Increased contributions and de-risking should ultimately lead to lower PPF levies in the longer term, but at what cost in the short term? Those schemes with the worst funding position and weakest employers are already paying the highest PPF levies.

Employer sustainability

We know many employers cannot afford to pay more. Will this be the straw that breaks their back, providing no improvement to benefit security but creating greater risk of a PPF claim? The dreaded concept of PPF drift is again at the fore and is not being adequately addressed. Linked to this is the knowledge that some businesses will inevitably fail, in part at least, thanks to their scheme (the so-called Zombies); is there a more effective way of identifying and dealing with these, without ‘infecting’ others with more to lose and little or nothing to gain from the proposed changes?

We know that employers only have a finite amount to spend on their DB promises. We have to ask ourselves a very difficult question – should we begin to fund for increased benefit security for DB scheme members only where the realistic aim is (if our see-saw works) that they receive something better than PPF benefits (aka PPF+)? Perhaps we would be better to acknowledge that this money could perhaps be better spent on additional contributions for those employers with DC schemes whose members are currently likely to receive much less.

These questions are difficult and the answers may not be known. We often talk about unintended consequences of regulation and legislation. The real risk is that the drive to increase member security and protect the PPF may only partially realise this but at an unpalatable or unnecessary cost. I hope TPR takes the time to consider this during their cogitation of part 2 of their consultation.

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Openreach’s shameful exploitation of the pandemic

This blog is about Openreach, who claim to be helping Britain  out with faster broadband.

The public face of Openreach

The reality can be very different. What follows is a case study in exploitation of the current pandemic which shows an organization paying no attention to the vulnerability of the people it claims to be helping. We are just marketing fodder in its ruthless quest to meet its targets. Working with Government it may be, but working for the people it isn’t.

Our story

This story begins in early January when I and my partner were self-isolating (I had Covid-19). We live in a block of flats in the heart of the City of London, about 200 yards from the global HQ of Openreach (BT wholesale)  in Knightrider St. But since we moved in , in 2015, we have had the internet connection from hell. Trying to run multiple devices on our connection is often impossible.

It has meant that my partner has to go to her office to work – putting herself and others at risk so she can carry out a keyworker role that could – with fibre broadband – be carried out from home.

So imagine our delight when we received a letter – delivered to our flat by the Royal Mail- from OpenWork telling us that were we to follow a web-process, we would get our long-awaited upgrade to a fibre broadband connection.

This was what we’d waited 6 years for and all this could be done without us having to break our quarantine! This was a Government backed project and it was being offered us not by some rinky-dink chancers but by Openreach, a company owned by BT, the company who’s broadband service we subscribed to who had been telling us month after month that help with fibre was on its way!

We contacted our managing agent by phone, email and we completed the forms Openreach requested of us. We were surprised we needed to do this as our managing agents had been trying to help us for many years but had been told by Openreach that though we were in the heart of one of the most connected places in the planet, our block was not a priority.

And then the kick in the teeth.

It turned out that this letter was not the promise of faster broadband. It was simply a way to get leaseholders  to put pressure on bad landlords and it turned out Openreach had no intention of getting fibre into our building until after lockdown ended (and then only when it became their “priority”

On hearing this news – conveyed to us by the managing agent who was able to speak to Openreach, I decided to speak to Opernreach myself.

No such luck.

Openreach’s website is a mess of pro formas which never gives up so much as an email , let alone a dedicated helpline. What support there is simply takes you through the usual series of automated options, none of which is manned, leading you back to the pro-formas on their site. It is Kafka-esque,

To break the frustration, I sent an inmail on Linked-in to Openreach’s CEO. This is the only way I know to get any kind of response to a tech firm that uses tech to hide from its clients and it got a result. I got a call from Openreach’s Infrastructure Solutions Executive Level Complaints Team confirming what my managing agent had been told , but worse, that there was no promise from Openreach that even  when lockdown was over, we would get connected.

I asked what the point of the letter was and was given this explanation. Openreach have a plan to roll out fibre to blocks like mine but need the permission of landlords. The statement “we’re now in your area” means nothing, whether you get fibre depends on “more people in your block registering an interest“. There is only one way to interpret what is going on; Openreach are exploiting the desperation of residents locked down in urban flats to capture their details for marketing purposes.

The statement “we just need the permission of your  landlord or managing agent to access the building and do the work” is a lie. Openreach is building up a pipeline of work for itself once the pandemic recedes (and with it the vital need for fibre), in the meantime they are extracting personal information from vulnerable flat-owners that Openreach has been under-serving for years. Openreach has no intention of doing any work in my building till it suits them and all the fuss and bother flat-dwellers are put to turns out to be of no immediate benefit to them. Indeed we find ourselves with no firmer promise of fibre than before this letter arrived.

This is utterly despicable behaviour. It is exploitative and the letter was  sent when our area was under the most stress from Covid it ever had been. The letter arrived on January 8th.

The  failure of Openreach to get fibre into a building in London EC4 is still unexplained. The sub-standard broadband we receive from Openreach’s former parent British Telecom is not discounted because it only half-works. BT takes no responsibility for the situation, saying it’s now Openreach’s problem and Openreach is now a separate organisation. Openreach’s appalling complaints procedure and refusal to apologize for any aspect of its behaviour mark it out for special  criticism.

We were not the only people getting this letter, I assume that everyone in our building got one and everyone in the other blocks that Openwork has failed to connect. Openwork has now conceded that it has had permission from our managing agents to do this work though they can’t tell me when this was granted.  I suspect that they have had it all along, that’s certainly what the managing agents say.

And what of Openreach’s claim that they can’t do the work till lockdown ends? I pressed the “executive level complaint handler” on this and asked what he considered a priority if not the connectivity of customers. It would seem that there are certain priorities much higher though the fleet of Openwork vans parked all around Knightrider street and the number of Openreach engineers sitting in them , suggests that there is plenty of capacity.

The public doors of the Faraday building are locked but I see a regular stream of workers entering the side doors every week day. The Openreach engineers I have spoken to about connection weren’t aware of any reason why our flat couldn’t be accessed, surveyed or connected. Indeed for them , January was business as usual.  Just as the pandemic is a call to action for flat dwellers, it’s a reason for inaction for Openreach’s management. This just isn’t right.

What does this say about corporate governance?

The investor’s view

Although Openreach is a separate company from BT, it is still a division of BT and the most profitable division. In June 2018 BT offloaded 31,000 staff to this separate identity but the division was valued in May 2018 at about £20bn.  That is double BT’s market capitalisation.  The value of Openreach is underpinned by its near monopoly on connecting Britain to “fast fibre”, the roll-out of which is part of BT’s £12bn strategy to achieve 100% coverage by the end of the decade.

BT’s ever diminishing share price is almost as dependent on Openreach as we are. But BT takes no responsibility for the behaviour of Openreach. As BT’s head office is almost as close as Openreach’s , I also paid them a visit to see if I could speak with them but they simply referred me to the same dysfunctional complaints procedure at Openreach.

BT – so long as it remains publicly quoted, will form part of all our pension investments and its behavior is therefore all our business. The failures at Openreach are – for investors – failures of BT. Openreach mailing people made vulnerable by the pandemic, scaring them , over-promising and failing to give any support for help or complaint is a disgrace on Openreach and BT. From a corporate governance perspective, the behaviour of Openreach is simply not good enough.

But I guess the market knows this .

If you’ve got no fibre connection and get a “frightener” from Openreach as we did, there is something you can do. You can phone this number

0207 105 9580

which gets you through to the Executive Level Complaints team.


I had been assured that Openreach had received the permission to conduct their work by our managing agent. I had  been told the letter I received was  unfortunately timed. But it appears that further letters are being sent to my neighbors , with two reported yesterday.

Openreach are claiming this is a campaign to get action from landlords, if so it is indiscriminate and uncontrolled.  Openreach should stop sending these letter immediately.

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