It’s not pensions that are scary – it’s “search”!

Every day, thousands of people worry where their pensions, how much they’re worth and what they can do to get their money back. Pensions are scary but they are not as scary as what you find when you search the web! The story Iona’s quoted on appeared on Yahoo Finance, but we don’t have to look far to find that Yahoo finance are promoting “advertorial” that isn’t much better.


Before you think that I’m knocking search, I should point out that this blog would be a pretty boring place without google and yahoo that allow me access to an understanding of what to do (as well as what not to do).


This of course is both the value and problem of search.

Who’s googling pensions?

I’ll lay a pound to a dollar (not much of a bet these days), that a high proportion of those googling “pensions” are finding their way to the kind of dubious propositions the FCA are so worrying about. That’s because those with the wrong intentions are very good at SEO (search engine optimisation). Googling final salary schemes does not take you to a website that tells you how final salary pensions schemes work, it takes you here

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Four ads designed to help you get out of final salary pensions.

And the people who are searching are almost certainly going to end up with the wrong kind of advice , charged at the wrong end of the spectrum in a contingent way.

This is where the problem starts and where the FCA should be focussing its efforts (if it wants to reduce the number of people transferring when it thinks they shouldn’t.

This is not cold calling

The traditional boiler-room scam, initiated by a cold-call is dead. It died before the cold-calling ban came into effect. Most bad advice originates from “search” not a cold-call.

If you go to the websites behind the ads, there is nothing actionable to be found. Lead generation for IFAs is perfectly legal.

Darren Reynolds generated a good proportion of his leads – not from chicken dinners – but from the Money Advice Service’s search an IFA facility which disastrously through up Active Wealth Management if you input your location as Port Talbot.

MAS were not actively promoting scamming – but they promoted scamming nonetheless and the FCA can no more prosecute Google or Yahoo than they can MAPS.

This is OUR responsibility

Some scammers may read these blogs, but for the most part they’re read by trustees, employers and other fiduciaries who feel they have either a duty of care or a regulatory responsibility to protect members.

Let me be straight with you.   YOU – ME – WE’RE FAILING

We should be taking personal culpability that people are googling Final salary pensions to get out of them, that they’re finding mini-bonds when looking for income.

We should not be leaving it to our staff/members/policyholders to find complex solutions to their financial futures using web-search, we should be making it perfectly clear what their next steps should be and they should not include finding a pig in a poke on the web.

The pensions map is like the Straits of Hormuz, people, like oil tankers , are forced into a tight situation when they come up to retirement, and like fully laden tankers- they are full of money and at their most vulnerable.

We should not be relying on more legislation to stop the scammers, we should be taking personal responsibility.

Over the course of this week , 23 of Britain’s largest employers and/or reps of their pension schemes visited WeWork More Place and discussed how to help people who fall into these categories.

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the things people want from their pension pots

We are about providing simple things for employers/providers/fiduciaries to do when you meet people with these wants.

Ruston Smith is helping people find good IFAS

AgeWage is helping people find good annuities

Quietroom is helping  people find the right words

We are all trying to help the majority of people who are totally lost and in danger of asking google or yahoo for “next steps”.

We are running two more of these events at the end of the month. If you have people who are asking for things from their pension pots, you can help them.

Simply sign up here


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The first 100 people to find this blog




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Absolutely true (as I visited the Royal Mail)


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How the Royal Mail pension schemes are run

Whether it be through its Final Salary Scheme (RMPP), the interim Cash Balance arrangement or its DC trust, Royal Mail Pension Trustees have consistently over-delivered to their organisation and the members of the various Royal Mail pension schemes.

This has been overlooked but is rather important.

Under the excellent investment management of Ian McKnight, the funding costs of the promises made to postal workers have been stabilised and look in future to be negative (at times plans have been in surplus with attendant savings to the ultimate sponsors (including the Government).

Ian has worked with Ben Piggott, who is in charge of the DC arrangements looking at innovative solutions to the shortcomings of insured DC defaults, though these have been stymied by permitted links regulations (liquidity based) , hopefully they will bear fruit in the investment strategy of the imminent CDC plan – which McKnight expects to be “punchy”.

Further innovation comes from Tim Spriddell, a consultant to the Trustees who is so embedded in Royal Mail communications that I can speak of him as the architect of the member’s communications. I love the RMDCP video- made with Quietroom

With Mark Rugman and Michael Mayall providing the link to Royal Mail’s member benefit administration, Richard Law-Deeks can be very proud of the team of whom he is chief executive.

The Royal Mail’s pension executive is a fine example of how pensions should be run – and I cannot say that for all the executives I have visited recently.


How the Royal Mail pension schemes are governed

The management of the Royal Mail pension schemes is down to the executive, but strategic decisions and oversight is up to the Trustees.

You can read about the Trustees of the DB plan here. Joanne Matthews, Mark Ashworth and others represent the  independent ones and Phil Browne and others from the Royal Mail fill the rest of the places other than Graeme Cunningham and Lionel Sampson of Unite and CWU respectively. Though this plan is no longer accruing new benefits, it underpins the pensions of most postal workers and is of vital importance. The executive and trustees need to work properly together, I get the impression they do.

The (new) Chair of the Trustees of the DC plan (RMDCP) is Venetia Trayhurn.  

Victoria spent time at the Financial Ombudsman Service and we had a good conversation about protecting member’s interests when she came to a recent AgeWage workshop. She works as a professional trustee for LawDeb but gave up her time to come to a workshop we gave this week about helping members with their difficult retirement choices.

Other trustees include Jon Millidge, formerly the company HRD and instrumental in negotiating the proposed CDC plan with Terry Pullinger and the CWU. Though the DC plan is likely to be superseded by the CDC arrangement , you can see by the attention paid to its communication, that it is anything but a poor relation.


What does this mean for members?

Postal workers at Royal Mail are properly pensioned and – provided the Government don’t renege on promises, will continue to be offered build up of a  wage for life pension into the future.

My recent visit to their Pension’s Office in Ironmonger Lane in the City of London and meetings with their trustees, teaches me that this is an organistion where sponsor, trustees and pensions executive are working together with the member’s interests at heart.

I love writing this blog, because it lightens my heart that there are places in Britain where pensions excellence persists, and Royal Mail is one of those places.

They are setting the gold standard against which others can be judged and we should be grateful that they do.

What this means for the members of the various Royal Mail pension arrangements, is they can work with the comfort that when they stop working, their pensions will last as long as they do.

Oh and don’t confuse the Royal and Daily Mail!

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Are you safer in your pension?

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The FT report news uncovered by AJ Bell that people may be safer from scammers – leaving their money in their pensions. The police units that report financial fraud and cyber crime have produced figures

The figures showed reports of pension fraud have been on a downward trend for the past five years, with 345 cases reported in 2018, down from 1,828 cases in 2013. Over this period, the financial losses from pension scams fell dramatically from £96.6m in 2013 to £14.1m in 2018.

Meanwhile – out and out scamming continues , but from people’s bank accounts – not their pension accounts.

The number of investment frauds reported in the first six months of this year hit 8,153, almost double that during the same period last year

On the face of it – this is good news for pensions, but as we found out in the pension transfer debacle, the complex structure of a self invested personal pension allows for so many layers of intermediation that scamming can be “fractional”

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The self-invested personal pension has enabled the various participants to double or triple up charges as happened in the unholy alliance between Celtic, Active, Gallium, Vega and Newscape – which took so much money out of the Port Talbot steelworker’s pensions.

If you extract over 3% on a £500m portfolio, why bother with UCIS investments that draw attention to yourself. The ultimate destination of Active Wealth’s advice on money were legitimate funds within the Newscape/Vega DFM. Such fractional scamming is almost impossible to stop – because it relies on permitted practices which only become ruinous when repeated again and again.

The police figures spectacularly miss the point

The days of out and out villainy in pensions are over. And that is because the FCA and tPR are on to the obvious villains. Project Bloom has simply moved these villains along, they are now practicing their trade online – using Linked in and other professional sites to advertise bitcoin crypto-currency nonsense – usually with a fake endorsement and a pretend association with a national newspaper.

Because the villains are cleverer than the coppers, they will stay one step ahead. Bloom is – sadly – shutting the stable door.

One of the insights that Quietroom gave us at our recent workshops (Straits of Hormuz) is that scammers differentiate themselves because of their outstanding customer service.

These points were made by Michelle Cracknell at the time of Port Talbot’s kerfuffle.

Scammers are also clever enough to see just how far they are in front of the chasing pack of policemen and regulators.

The importance of not being complacent

The point is this; the scammers are eroding our pensions slowly through hidden charges which we only find out about after the rot has set in a few years.

The old style scammers are off elsewhere – where the scrutiny is less.

But to think that pensions are scam-free because of the numbers reported at the top of this blog is to spectacularly miss the point,

Sadly the FT doesn’t seem to have worked this out yet – but I am sure Jo Cumbo will put that right!

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Help for Trustees, Sponsors and Members with AVC plans

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I’ve divided this blog into two- the first bit’s for the people who have charge of defined benefit schemes and relates to the DC savings plans that members can use to supplement their pensions (AVCs).

The second bit’s for the members, but it will probably be helpful for those in charge – who may be members – and may have the job of explaining these complicated things in simple terms.

I recently had to make decisions on the AVCs I paid, and much of this relates to my personal experiences. I was lucky, I had plenty of help.

I am not a tax expert and I don’t know my way around all the arcane rules that govern AVCs ( the older the more complicated) but there are people who do , who are there to help you and this article is here to help those people who might otherwise google – stick to the true and trusted sources – your scheme administrators, your trustees and the Government helplines that really are impartial/

This bit’s for trustees and DB sponsors

Back in the day when corporate benefits structures were about defined benefit pension schemes, additional voluntary contributions were considered very important.

To those who have paid them, they still are.

But the focus has shifted and nowadays the AVC schemes set up in the last quarter of last century are consigned to the legacy cupboard.

Trustees have got better things to worry about, like keeping tPR and the sponsor happy.

But the money in these AVC schemes with the likes of Prudential, Standard Life, Aegon, Aviva and the Equitable Life is still the trustee’s responsibility, they own the policies not the members and they have a fiduciary duty to ensure these schemes are giving value for money. Increasingly the DWP – through tPR – is looking at value for money as the primary concern of trustees looking after DC benefits.

In its recent investigation of transparency, the DWP’s Work and Pensions Committee called for a definition of value for money that could be applied across all DC pension pots. We have given a lot of thought to what that definition should be.

What “value for money” means to members

The two things that concern someone saving into a DC pot (AVC or otherwise) are money-in and money-out. Money goes into the pots by way of regular and special contributions, in the case of AVCs from payroll. Money comes out of AVCs into annuities, as cash (sometimes tax-free) or into personal pensions which are used for drawdown.

Value for Money is a measure of what happens between “in and out” and is best measured as the internal rate of return achieved uniquely by each contributor. Each contribution history is unique as is the output – the net asset value – or in the case of with-profits investments, the plan value.

But simply giving a member his or her internal rate of return (IRR) is meaningless unless it is compared to a benchmark. If benchmarked, the IRR can show whether the AVC has done better or worse than average, what the value for money has been.

Creating the benchmark and a VFM score

Until now, no organisation has created a meaningful benchmark, against which to measure the internal rate of return of AVCs for VFM purposes.

Which is where AgeWage comes in. We have co-created a benchmark with Morningstar , the rating agency. We have used indices going back to 1997 and fund-baskets before then, to create a daily price track representing the fluctuations of a typical DC pension fund going back to 1980. Investing a contribution history into this price track creates an alternative IRR, being what the average AVC saver would have got.

We are able to calibrate the difference between “achieved and average” to create a score out of 100 – with 100 being outstanding and 0 being dire.

Better still, the universe of data we have already built up makes this score comparable to the VFM members may have got from other pension contributions, for instance into workplace or stakeholder pensions, even DC pensions in payment.

What AgeWage scores mean to trustees

Trustees running DC schemes (which we take to include DC AVC plans), have a fiduciary duty to get value for their members contributions (money)

Their care on this matter is likely to be scrutinised by tPR. 

Trustees are vulnerable to criticism and even censure – if they have no regard to member’s voluntary contributions.

But more important than “compliance” with regulation, we believe that the reputation of trustees as upholding member’s interests is of critical importance, especially where those trustees are under pressure to add value

This bit’s for members

I’m surprised by how little attention is paid to helping members of DB plans with their AVC pot. I’m quoting here from a guide given us by the Prudential.

Currently, from age 55, you have a number of options to choose from when you decide to take the money in your AVC pot. You may need to move your AVC pot to another pension to access some of these options or to access them when you prefer.

  • Take flexible cash or incomeYou can do this by moving your money into a drawdown plan. In most cases you can take up to 25% of your money tax-free, you’ll need to do this at the start. You can then dip in and out when you like or take a regular income. This may be subject to income tax.

  • Get a guaranteed income for life
    You can buy an annuity – it pays you an income (a bit like a salary) and is guaranteed for life. These payments may be subject to income tax. In most cases you can take 25% of the money in cash, tax-free. You’ll need to do this at the start and you need to take the rest as income.

  • Cash in your pot all at once
    You can take your AVC pot as a single lump sum. Normally the first 25% is tax-free but the rest may be subject to income tax.

  • Take your cash in stages
    You can leave the money in your AVC pot and take out cash lump sums whenever you need to – until it’s all gone or you decide to do something else. You decide when and how much to take out. Every time you take money from your AVC pot, the first 25% is usually tax-free and the rest may be subject to income tax.

  • Leave your pot where it is
    You don’t normally have to start taking money from your pot when you turn 55. It’s not a deadline to act.

  • Take more than one optionYou don’t have to choose one option – you can take a combination of some or all of them over time.

Now tax is the hard bit. You can of course take tax free cash from your defined benefit plan – but this means you have to swap pension for cash- like you do when you take a pension transfer. The exchange rate between cash and pension is down to what the trustees (advised by their actuaries) choose to offer you. Some may be generous and only charge you a pound of lifetime income to get £30 cash, some can be stingy and charge you a pound of lifetime pension to get £15 cash. It’s all down to what actuaries call commutation factors.

If you have a really generous set of trustees, they will let you use your AVC pot to fund your tax free cash meaning you don’t have to “commute” cash for pension. This is almost always a good thing to do.

The “almost” bit refers to AVCs which can be exchanged for an annuity at a preferential rate – what is known as a “guaranteed annuity rate” or GAR. If you see any mention of such things in your AVC literature you should check out what the GAR deal is with your pension manager or with the insurance company who offers the AVC (there should be contact details on the communication.

So what about this 25% tax-free cash option?

If you can’t swap your AVCs for tax free cash, (because the scheme rules don’t) allow, you can usually take your AVCs as a lump sum or transfer to a personal pension. In either case you should be able to get a quarter of your AVCs as tax free cash.

But you need to check with your scheme to make sure that you don’t fall foul of one of many very complicated bits of tax legislation that surrounds these old style pensions.

Where can I get help (that doesn’t cost an arm and a leg)

I don’t mean to sound biased but I strongly suggest that if you have any doubts about tax, you speak first to your scheme and see if they have advisers who can help you. Most do and most will allow you to understand the complexities of the situation using advice that is paid for – not by you – but by the trustees (and ultimately by your employer).

You can also get help from the Pensions Advisory Service that is now part of the Money and Pensions Service (MAPS).

Their  pension helplines are open from 9am to 5pm, Monday to Friday.

They are available on webchat from 9am to 6:20pm.

Theye are closed on public holidays.

Pensions Helpline: 0800 011 3797
Overseas helpline: +44207 932 5780

Helpline for Self Employed: 0345 602 7021

Posted in pensions | 5 Comments

Navigating pension’s Straits of Hormuz

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The contested space between the Persian Gulf and the Gulf of Oman

We met last night in a crowded room in Moorgate WeWork. We were an eclectic mix of pensions directors, chairs of trustees , annuity experts Retirement Line,  Ruston Smith, Vincent Franklin and me.

You can see the slides here

Unfortunately slideshare won’t show the embedded video from Quietroom which you can watch below. I know lots of us have seen the horse in the orchard before but it’s worth reminding ourselves how simple the choice architecture can be made.

The premise of the evening was that moving from the controlled world of workplace pensions to what comes in retirement is the financial equivalent of passing through the Straits of Hormuz

Check out the map at the top of the blog and see where you think the pensions equivalent of the Straits of Hormuz are on the Quietroom/DGP map of the pension world.

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The contested space between the workplace and retirement


Vincent Franklin’s analogy brought to mind brigands from Somalia and state sponsored raids from Iraq. It is easy to draw parallels to the ravages on people’s pension pots from scammers and the Treasury

Perhaps the most important point of the evening was made by Boots’ Julie Richards who pointed out that while the £20,000 saved by one of her staff might not sound much to pensions professionals, it was possibly the most significant savings achievement to that person.

Denying that person the right to that money on their terms was an insult to that achievement. But not helping them understand the perils of being scammed by brigands or losing out to the taxman, a failure in personnel management.

Treating all pension pots as equally important

Julie’s comment set the tone for the evening. Whether you have £20,000 or £2m in your pension pot, that money is important to you and deserves the same attention from pensions professionals. We cannot go on supporting the wealthy and ignoring the savings of those with smaller pots.

The meeting focussed on the needs of four groups of savers whose plans could be characterised by one of these statements

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For those people who wanted access to an IFA, help was at hand as Ruston Smith talked us through an important initiative he is pioneering at Tesco where IFAs he introduces to his staff will be required to abide by a code of conduct and be subject to due diligence by a significant third party. You can see Ruston’s ideas embedded in the presentation above.

For those who want to wait and see, we discussed the support that can be offered from MAPS and particularly Pensions Wise but also from the pensions departments of the leading companies around the table.

For those wishing to do their own drawdown, we discussed the investment pathways due to be implemented next spring as part of the FCA’s Retirement Outcome Review

While for those people wishing to buy an annuity, a range of options were outlined by Retirement Line, including the deferral of decisions using Fixed Annuities.

The point was that this was not about wealth at work, it was about everyone.

We’re all in the same boat

I came away from the presentation inspired by the enthusiasm of organisations as divers as Tescos, Royal Mail, ITV, Boots and BT. All professed to having different ways of helping their staff through the perils faced as they chose retirement options but all were in the same boat.

We can surely do more to help our staff, whether we are mega -employers like these – or we run one of the million SMEs (like Quietroom , Retirement Line and AgeWage) that have staged auto-enrolment.

The role of the employer in outlining the options available to staff in a clear and concise way is what employers can do. They may not feel up to doing the guidance themselves but they need to know the resource that is to hand.

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You can come to future workshops

If you have staff who are coming up to retirement and you’d like to find out how you can help them navigate the pension straits of Hormuz then there are still spaces available on 28th and 29th August. There’s one space for tonight (Wednesday 14th August).

You can sign up to one of these days using this invite

Invite to AgeWage summer workshops

Posted in advice gap, age wage, pensions | Tagged , , , , | Leave a comment

Convince or collapse – the options for small DB schemes in the next decade.


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We stand on the cusp of the third decade of the 21st century. That decade is likely to see small DB schemes collapse into consolidators or stand firm with renewed conviction. I wonder if I will still be writing blogs in the summer of 2029 to review this statement, I suspect that most current trustees of DB plans will not be around to read them – if I am.

Yesterday I paid my first visit to Vestry House in Laurence Poutney Hill, the offices of Disruptive Capital and its nascent Pension SuperFund. Whether this DB consolidator succeeds or fails is itself a matter of conviction, it looks as if Edmund Truell has dug in his heels and it will be hard to dislodge him. But if he fails, there are others – such as Laurence Churchill’s Clara, that will step up to the plate.

The Treasury are giving support to the insurers who fall under their regulation (FCA and PRA).

The DWP have decided that consolidation will happen their way and though the Pensions Regulator is dragging its feet, the pensions industry generally expect the non-insured consolidators to get licensed by the end of this year

Two ugly sisters

TPR has adopted an attitude of tending small schemes through a fast track process which is the pensions equivalent of the Liverpool care pathway. A gentle decline into insurance – “go gently into that good night”. This is not pleasing the consolidators who wish they’d listen to their paymasters at the DWP.

Insurance companies have lobbied hard against the DB consolidators, claiming they are simply exploiting loopholes in regulation to underwrite buy-outs without the requirements of Solvency II. They have the Treasury’s support.

In the face of considerable opposition, the Pensions Superfund has hit back with a report commissioned from Redington proving against a number of (to me) incomprehensible measures, that the asset allocation of consolidators (modelled on the PPF) provides better outcomes in all weathers than those of insurance lifeboat funds.

This is not a fight that I want to get into, not least because of the twitter storm going on after I pointed out the availability of life annuities in the Times. Redington’s analytics have always been suffeciently arcane to prove any point, insurers are hardly charities;- who is there to love?

Insurers and consolidators are the two ugly sisters. They will be going to the ball long after Cinders has had her pumpkin night out.

Faith in small schemes waivers

Small DB schemes have to face a harsh choice. Either they go back to their sponsors and members and argue for their continued existence – with conviction- or they collapse into consolidators. I don’t see the Liverpool pathway as much of an option – though it will keep diverse pension administrators, accountants, lawyers, fund salesmen, platforms and most of all professional trustees in a job at least till the summer of 2029.

But the job of the employers who sponsor these schemes is not to act as surrogates to the Ugly Sisters, but to produce things, or do charitable things or to provide services and the cashflow calls of the pension schemes are unsustainable, the blight on business strategy unmanageable, the impact on productivity dismal.

We can’t let small DB schemes blight corporate and charitable strategy, these schemes must either shape up or shape out. This is not Edmund Truell talking – it’s me – and I work for an actuarial consultancy that is supported by small schemes.

The residual value of small schemes

Small DB schemes can and do add value to companies, but not when they put themselves on the pathway, then they only act as a succubus.

My point is illustrated by this graph – devised by my friend Derek Benstead so that even I could explain the value of keeping a pension scheme open

life cycle open

There is no great benefit in closing your own scheme, you might as well collapse it into whatever the ugly sisters are offering. You’ll pay a price for off-loading it, but it’s far from clear to me that insurance companies are worth the extra price that solvency II creates, they are the non-profit option and at the non-insured consolidators are holding out some hope of with-profits increments if they are proved right.

Your choice as a Trustee is probably dictated by the pockets of your sponsors, they will in the next ten years be looking at what the ugly sisters have to offer and they will ultimately be making the call.

The value of small schemes is int the conviction of their trustees and the aspiration they can create with sponsors. I can’t see schemes re-opening, I can see schemes resisting closure and I see those schemes that struggle on doing so on a radically more effecient basis.

The proper management of open schemes will increasingly involve modern systems of record keeping – the adoption of digital communication with members, low cost asset management using platforms to drive down costs and e-payment of pensioners.  Trustees who do not employ efficiencies available through new technologies will perish.

The value of small schemes lies in their capacity to adapt to tomorrow’s world, while preserving yesterday’s promises.

How many DB schemes will survive?

I doubt that more than 1000 of the 7000 remaining DB schemes in this country will be around for me to blog about in 10 years time.

I believe that consolidators and insurers – the two ugly sisters of the pensions world, will convince sponsors who remain unconvinced by their schemes, to pack it in. The ongoing costs of keeping schemes open will ensure this is the case. The PPF will remain the lifeboat – the third ugly sister – though she waits in the wings.

This is a harsh prediction and I hope I am proved wrong. The prediction is a challenge for trustees (especially independent trustees). It is also a challenge for consultancies and other professional firms.

We are approaching the third decade of the 21st century and it is a decade that makes or breaks DB schemes. The ugly sisters have already arrived at the ball, will Cinders?



Posted in CDC, dc pensions, de-risking, defined ambition, defined aspiration, pensions | Tagged , , , , , | 2 Comments

Can an annuity ever be the right choice?

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I did another of those Portfolio Therapy questions for the Times over the weekend.

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Alaska and Gloriana below Hurley Lock

The lock-keeper at Hurley jumped me on Saturday morning – brandishing his copy of the thunderer!

See what you think!

Where can I invest my £1.2m savings?

Julie Petersen, 62, originally from Wales, has spent the past 26 years living in Hong Kong and Singapore, where she works as a researcher for several broadcasters.

In 2021, aged 64, she plans to retire and move back to the UK. Julie, who is single, is wondering how to finance her retirement back in Britain. She does not have a conventional pension, but she does have £1.2 million sitting in a deposit account, which she wants to invest.

Julie, who has a sister and a nephew in Britain, will use about £600,000 of her pot to buy a property, although she has not decided where, and wants help with ideas for the remaining sum.

“I have been away for such a long time and I have never had a financial adviser, so I do not know whether I would be better keeping it in cash, or investing it,” she says. “I am at a loss to know how to go about this. Should I wait until 2021 to evaluate the outcome of Brexit, or go ahead now? I’ve heard it’s a really bad time to buy an annuity.”

Julie says she does not want to invest in the stock market.

Tom Selby, senior analyst at AJ Bell, the wealth manager
“Holding large sums of money in a deposit account might seem like a safe option, but Julie risks seeing her spending power eroded by inflation.

“NS&I bonds, which are backed by the Treasury and 100 per cent guaranteed, could be worth considering. They have a range of products paying 0.8 per cent to 1.95 per cent, although each has slightly different terms and conditions you’ll need to consider.

“Julie could also get about 2 per cent interest on two-year deposits from a number of banks and building societies. To maximise her level of protection she should spread her funds across multiple banks to make sure she is fully protected by the Financial Services Compensation Scheme, which applies to the first £85,000 of savings at any bank.

“Given she doesn’t want to take any investment risk, buying a purchased life annuity would be a sensible option. These provide a guaranteed income for life, although they are treated slightly differently for tax purposes, with a portion of the fund [the deemed return of capital] tax-free and the rest subject to tax. The amount that is tax-free will depend on Julie’s life expectancy.

“Purchased life annuities are not simple products, so Julie should speak to an adviser. It’s vital she tells her insurer about any health conditions or lifestyle choices she has which could affect her life expectancy.

“If you’re a smoker, for example, the insurer should pay you a higher income because it thinks you’ll live less long. Consider getting inflation protection so spending power is preserved over retirement.”

Henry Tapper, chief executive of Age Wage, a pensions rating system
“Julie will have to wait until she is 66 for her state pension. She can use thegovernment’s website to check how much her pension has been reduced while she was working abroad.

“Julie is healthy and has only herself to look after, so she’s best buying a purchased life annuity from an insurer through an independent financial adviser. This gives her a guaranteed wage for life, but she should consider delaying this until rates get better. In the meantime, she should put the money in a high interest savings account.

“If Julie did want to invest now, spending £500,000 on an annuity and leaving £100,000 in a savings account, the best rates on a purchased life annuity from Aviva would earn Julie a gross annual income of £25,700 from age 64, £27,600 from age 67, or £30,100 from age 70. She could also choose to buy what is known as an “escalation” purchased life annuity, which pays less at the start, but the income increases each year. Using the previous example, Julie would earn £16,169, £18,135 and £20,460 respectively, with her income rising by 3 per cent annually.

Dennis Hall, chief executive, Yellowtail financial planning
“With retirement lasting perhaps 30 years or more, Julie’s biggest risk is inflation, and an antidote to inflation is to invest in equities.

“I would encourage Julie to look at her reasons for avoiding the stock market. Approached the right way it offers a solution to her retirement predicament.

“If not, buy-to-let may be an option, although it too comes with risks. Capital is tied up with no easy access, and she has to consider rental voids, costs for repairs and maintenance, and fees, which will all reduce her income.

Julie says
“Thank you so much, this is exactly the advice I needed, I will be using it to plan my next steps.”

Henry says  I had more fun thinking about Julie’s problem than I thought I would. I think that solutions like buy-to rent and equity release do not give elderly people the security that they crave.

Julie is in the fortunate position of being able to retire debt -free. She can live in a decent house without a mortgage and have a reasonable income and cash in the bank. Money won’t make her happy – that’s down to Julie- who by the smile on her face – looks more than capable of looking after herself

Julie petersen.jpg

For those querying my preference for an annuity solution, I’d add

  1. Julie wants security – she is low risk and she’s looking after herself.
  2. Purchase Life Annuities are largely untaxed, being deemed mostly a return of capital
  3. If she’s taking a bet on her living long – she should opt for escalation
  4. If she’s prepared to take the risk of inflation taking off, she should go level
  5. Purchased life annuities are taxed preferentially (because they’re bought with taxed money and not from a pension) – details here.

Most importantly of all, an annuity is a wage for life, it takes away the difficult decisions of keeping money back, the worry of markets going up and down and it doesn’t need a financial adviser to manage.

Sure there is an opportunity cost for not being invested in equites- it’s called the equity risk premium, but that’s a cost that Julie seems prepared to pay.

Surely it is part of the pension freedoms, that people can choose the solution that’s right for them, not the one in the advisory handbook?

The alternative view from the financial community

Below, a selection of the comments I got for suggesting an annuity.

OK, I know and like these people, they are great advisers, but I have one question to their solutions, which is this,

“what makes Julie wrong to feel the way she does?”

I note that all the tweets I had on this were from men, a number were considerably more abusive but most carried an implicit threat that I was out of my depth and should be leaving this to others.

Julie had decided to put her position on paper – newspaper indeed. She made it clear that “she does not want to invest in the stock market”.

Solutions that involve investing in the stock market are wrong for Julie, not financially, but emotionally – and we are talking about a person’s happiness and financial wellbeing.

Eugen sees this seemingly well-balanced woman as a victim of her inability to see an IFA when living abroad

And Eugen continues

I think we are drawing conclusions too early. Once she understands the utility of investing, she could reach conclusions!

Can an annuity ever be the right choice?

Julie’s case is an example of where an annuity can be the right choice – for Julie.

I suspect that if Julie went to a financial adviser, she would get education but not an annuity.

When I was doing my research I could not find an annuity broker who could help Julie with a purchased life annuity, the quotes came from Aviva – from a reputable annuity broker but that broker would not transact the business.

So to buy a purchased life annuity, Julie would either have to battle with the market or seek the help of an IFA; if she did the latter – she would be facing “education”.

I don’t envy Julie’s lot; I think a purchased life annuity is probably right for her, but whether she will ever find a way of buying one – is another thing!

Even if an annuity is the right choice, it looks like you are facing an uphill battle to prove it!

Posted in pensions | 7 Comments

RBS – thank you very much


Yes you did read a positive headline about RBS and no- it was not written tongue in cheek

On Friday last, AgeWage received 62,000 contribution files from RBS’ pension administrator which will allow us to test the algorithm we are developing to deliver value for money.

We also – in a quite separate development – found out AgeWage has been admitted into the RBS Fintech accelerator.

\So thank you RBS – this is great news and so far as we can , we at AgeWage will big you up for helping us get started on our great enterprise.

So what are we doing with all this data?

Well .first of all, the data is anonymised and in terms of GDPR – disarmed, the warheads have been taken off.

We have the opportunity to see how scores are dispersed accross a population of members and we will be able to deliver the Trustee back information we hope will make its work on value for money , a little easier.

We see this as a valuable experiment – which if it adds value – proves the concept. But it does not make for a minimum viable product, (MVP). For AgeWage scores to be viable – they need to be virtuous, we have to see the scores being put to good use and great both commercial and social value – be both viable and virtuous.

So what is a Fintech accelerator?

I have yet to find out –  I look forward to finding out and reporting on progress. But I suspect this is not old skool – RBS; the bank is moving on  and it’s accelerating a shift to proper gender diversity – in the right places -including on the board.

My old college friend Ali Davis on the RBS board – she’s a high-powered business angel who lives just outside of San Francisco. She knows more about Fintech than I will ever.

And if the news reported by Sky this weekend, turns out to be true. RBS will become the first of our big banks to have a female CEO. I very much hope that Alison Rose gets that job.


Alison Davis (left), Alison Rose (right)

I have had many arguments with her about what a thieving bunch RBS are and that is now going to stop. A line has been drawn beneath all the chicanery and we’re going into this accelerator thingy with eyes wide open and a positive mental attitude.

RBS thanks very much

I know that many readers are waiting for the sting in the tail. Well – there isn’t one. This is a 100% pro RBS blog in which I state my aim of working with the bank, not kicking it in the nuts.

And if you feel disappointed, then don’t be. You too can get your pension data analysed and get AgeWage scores, just mail and we’ll send you a letter of authority or a bulk data transfer template – depending on whether you are doing it for yourself or your organisation.   – do it now!



Posted in advice gap, age wage, pensions | Tagged , , , | Leave a comment

Can I have my data please?

Data distribution

Random cartoon to cheer up actuaries

It’s a commonplace to think of data as we think of money, as something we either own – or guard on behalf of someone else. GDPR taught us that and though I’ve forgotten most of what I was taught about GDPR and the Data Protection Act, I am at least aware that you don’t mess with other people’s data and you do have the right to your data – in machine readable format.

Over the past six weeks, my noble intern, Scott Davidson has been assembling a list of excuses given us by the administrators of occupational pension schemes and  personal pensions (including SIPPs and master trusts) as to why they cannot honour the requests of our 500 investors who want AgeWage to see their data.

For some it is that AgeWage is not an IFA

For some it is that data requests can’t be delegated

For some that the letter of authority has an e-signature on it

For others it is that the LOA arrives by electronic mail

While for some it’s not enough for the request to be for data in machine readable format, they insist that the data arrives on a piece of paper or in a PDF surrounded by warnings that the data is dangerous.

Necessary pain

I don’t mind going through this pain – nor does Scott. We have to go through a process to get where we want to be. Administrators aren’t used to getting requests for contribution histories and are naturally suspicious (which is good because it stops the scammers).

There is no consistency which suggests that the pensions dashboard is not going to be an easy affair but I think there is a general willingness to co-operate, even if one or two providers seem to think their value for money should be as easy to understand as SERPS.

This is necessary pain

What is the win?

I have been told that what I am striving for is a minimum viable product or MVP. I would prefer this to be known as the Minimum Virtuos Product, for that is what I want to build.  I want the simplest way of describing value for money and I think I have found the concept, now I need to prove the concept and convert the concept into a product that is useful.

That is worth the pain.

My apologies to my investors

As well as its 500 investors  who are busy giving us data, we have large institutions. Yesterday we received 62,000 data files from various sources- creating a data -set that can justify our boast to have found a way to describe VFM is a data intensive business.

My investors may be wondering how we can get 62k files in a day but not get their file in a month and it’s down to one word “anonymity”.

Your file is down to you and it is your data not mine. I’m sorry that I am having to come back to your for wet signatures, with stamped address envelopes requiring you to go to a postbox you’ve forgotten was there!

But the trouble will be worth it.

Can I have my data please – yes you can sir- and soon you can have it as fast as it takes you to push “send”.


Posted in pensions | 2 Comments

Why the door’s slammed shut on open pensions.

Screenshot 2019-08-09 at 06.35.20.png

During the week, AgeWage was invited to compete in the  Nesta Open Up Challenge. Nesta is funded by the UK lottery – they are an agency of change sponsored by the likes of you and me;

As any entrepreneurial start-up would, we were excited by the prospect of a £1.5m prize fund to unlock the power of open banking for UK consumers. It’s hard not to want to be involved with an organisation with this claim

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality. It also means changing lives for the better

My aim for AgeWage is to provide all of Britain’s pension savers with a simple number telling them how their pension has done – in terms of value for the money  contributed.

So when I read that the eligibility for this award focusses on organisations that

Must target a total potential market of at least hundreds of thousands, ideally millions of consumers.

I felt in the right ball park.

But then the bad news; organisations that enter

Must use the Open Banking Implementation Entity (“OBIE”) API endpoints and conform to the OBIE Read/Write standards (“the Standards”) to programmatically access digital bank account data and/or payments functionality, even if in practice the Product does so indirectly by using the AISP or PISP capability of an authorised Technology Service Provider (“TSP’). Evidence of usage of OBIE API endpoints and conformance to the Standards may be sought by the judges as a condition of acceptance onto Open Up 2020.

and that was when our application ended.

Open pensions are as far away as ever

Our summer at AgeWage has been spent helping our investors apply for and receive the data they need to get AgeWage to provide them scores.

We struggle with bulk uploads of data from insurers and third party administrators that never arrive.

We are told we cannot process data because

the data provider

  • won’t accept e-signatures
  • won’t accept emailed letters of authority
  • won’t accept AgeWage as a data processor
  • won’t identify a customer without a policy number

I could go on.

We cannot operate effeciently unless we can exchange data in a free way. But there is no freeway for data requests because we do not have open pensions.

The idea of a free flow of information between customer and data provider is not entertained; despite the pensions dashboard being supposedly delivered this year.

Using scams as an excuse is not good enough

It is true that there are scammers who would like to steal money – after stealing data and pensions administrators, like banking administrators are right to be vigilant. But that does not mean that pension providers should put the up the shutters against innovation.

The data protection act of 2017 gave individuals the right to have data held by others about them , returned on request in digitally useable format.

That does not mean in a PDF or embedded into a word document. It means in a format where the data can be extracted and used for purposes the data owner has in mind.

Which might just include finding out how their pension has done compared to the average pension – by way of an AgeWage score.

Scammers are not to be used as an excuse for providing this information.

The sooner pension providers  think of open pensions the better

Earlier in the year I made a fuss about the pension dashboard and the exclusivity being given to Origo in the design of its functionality. I wanted (and want) pension information to be freely available on request through the use of the same data standards that have made open banking a reality.

There are of course limits to the success of open banking, but we are living with the happy results. I get a text message every day of money in and out of my account – on my phone – my watch – my laptop – where I want it.

My money is now more accessible, more manageable and better governed than ever before. That’s because there is absolute transparency between First Direct’s systems and what I see at 6 am every morning.

This kind of transparency was achieved because of the determination of the CMA to force banks to out customer data using secure protocols called the CMA 9.

It is now expected of anyone wanting to compete for money from Nesta, that they subscribe to these standards.

I cannot subscribe to these standards , because – much as I would like to adopt them – there is no counter party. And there is no aspiration amongst pension people (other than with a few Pen-techs like Pension Bee), to see this change.

Until there is this aspiration, the pensions dashboard will continue to dawdle along at an unsatisfactory pace and the public will become increasingly disillusioned.

The old way of doing pensions, where you worked a lifetime and then got told what you were getting at retirement is gone. That was the world of SERPS and DB pensions

Instead we have a world where we have to take decisions on what we’ve got, which – by the time we get to the end of our working lives, will include many pension pots.  People need to get the information they need to take decisions for the future and organise themselves. They simply don’t want 400 sheets of paper – they want a single sheet of numbers – so they can make sense of their information.

Lengthy wake up packs are precisely what people don’t want. Wake up packs present information in the way we want it digested, but it gives people financial indigestion.

We have to move to clear digestible financial information available at the swipe of a phone , using proper security protocols. We must move to open pensions and the organisations that must make this happen start with Government and work right down to AgeWage.

This starts with Government and ends with AgeWage

Whether the energy for change starts at DWP, BEIS or HMT – we need a new commitment to open pensions for currently the door is slammed shut.

We need the pensions dashboard released from MAPS and put in the hands of the technology entrepreneurs that disrupted banking to give us open banking. Those entrepreneurs are all around us, they are waiting to work on pensions given half a chance.

We need the ABI and its technology partner Origo- to open itself to change and not seek to colonise the infrastructure of the pensions dashboard.

We need insurers, third party administrators and the in-house teams that manage occupational pensions to work towards a solution that applications like AgeWage can adopt.

So that we can hold our heads up high and say that pensions is no longer the technology laggard, but fully participating in challenges that Nesta and others set us!

Posted in advice gap, age wage, Pension Freedoms, pensions, Start ups, Technology | Tagged , , , , , , , , | Leave a comment