For millions of people, Nest’s the only investment they’ve made

Posted on February 25, 2026 by henry tapper

I’m a Nest investor and though I’ve been an investor all my adult life , I don’t get as much fun out of it as I ought. I’ve been enjoying getting insights into what Nest do with my money and how they go about getting a return on my money. This is the latest of a series of posts all of which I’ve enjoyed (so far).

 

I have to say , it’s only through social media that I get to see these little gems. There is a lot of decent informative stuff on Nest’s public site and I use my personal site to find out what is going on with my money, but I’m one of 13m people who have skin in Nest’s game and I hope that I’m not the only one enjoying what I’m gettting.

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More trustee responsibility for admin standards (not increased regulation).

Posted on February 25, 2026 by henry tapper

I came across this press release from Lumera, a Swedish pension software supplier who recently bought ITM and are making waves with their thinking.

It made waves with me yesterday as I think about the challenge of our administrators of offering CDC to millions of British workers wanting pensions. You can read the original announcement here.

DWP should empower trustees to enforce minimum standards rather than extend direct regulation and build a new authorisation regime. 

Lumera, a leading insurtech company dedicated to the digital transformation of the European Life and Pensions industry, provides its views on the Department for Work and Pensions (DWP) consultation on trustees and governance.

As part of the consultation, which closes on 6 March, DWP is seeking feedback on the benefits of introducing new minimum standards as part of its objectives to raise standards in trusteeship, governance and administration of trust-based workplace pension schemes.

In Lumera’s view, minimum standards could drive a step-change in quality across areas such as administration platforms and integrated service providers (ISPs) as well as data quality and management standards. It would enable the industry to build on the ‘good practice’ standards that are already in place across the market.

However, it would be better for DWP to concentrate on enabling existing regulated entities – primarily trustees – to enforce minimum standards rather than building new authorisation regimes.

With regard to ISPs in particular, minimum standards could go further than existing guidance on good practice, such as that issued by the Pensions Administration Standards Association (PASA), in areas like the technology offering for carrying out ‘matching.’ For example, a minimum standard for ‘matching’ could ensure that specific schemes do not flood the dashboards universe with bad responses and data, hampering the user experience for all.

In a wider sense, minimum standards can mitigate the significant data risks that administration service providers face from increased levels of consolidation activity. Safe data migration during the transition of administration services is critical, especially in a Defined Contribution (DC) market where historic issues with administration sometimes only come to light during consolidation execution. Minimum standards for consolidation readiness that take account not only of data quality, but also administration processes and reconciliation of member holdings with fund managers, would again minimise the risks from consolidation.

Maurice Titley, Commercial Director, Data & Dashbaords, at Lumera, commented:

“The DWP’s proposals on mandatory minimum standards for integrated service providers (ISPs) come at a critical period of evolution for the sector.

“By focusing on minimum standards, rather than adding layers of regulation that could inadvertently slow down progress, we can ensure a more effective and streamlined approach to this new but critical area of pensions administration.

“This is all part of a direction of travel that requires an acceleration in investment in technology-driven solutions and secure data management processes to put trustees and administrators in a strong position to meet all the upcoming regulatory requirements.”

My comment

We have come from a pensions world of 5,000 DB schemes and 40,000 DC plans (regulated by the Pensions Regulator). Consolidation will lead to a handful of DB schemes and a handful of DC plans. There will be a few  CDC plans and some of the above will be hybrid. But British pension regulation will become much simpler in terms of numbers.

A few schemes and a few trustees who will become the guardians of best endeavours  choosing and monitoring software of the humans to deal with issues that can’t be dealt with by artificial intelligence. That means more responsibility on trustees and less work for the Regulator.

 

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LGPS must stop sitting on its surplus or it will be changed by popular demand

Posted on February 25, 2026 by henry tapper

Yesterday I blogged about the failure of LGPS to win the hearts and minds of many in Birmingham, Wolverhampton and West Midlands in general by sharing their £11bn pension fund surplus with the councils and council tax payers. The West Midlands LGPS scheme is run out of Wolverhampton (referred to as the Wolverhampton hoard)

I shared some of the blogs and Linked in Blogs from the Blackstuff.

 

I did not know that Reform UK would use the anger of many outside the pension bubble to launch a proposal to convert the £500bn LGPS into a wealth fund by Reform UK.

But I had warned LGPS last summer that it needed to work hard to avoid just this happening. Last June I was at the Pensions UK Conference of LGPS folk and there was talk amongst the Reform UK councillors recently elected to post and to office at LGPS that things were going to have to change.

I argued then that LGPS could not sit back on dormant assets and would have to get on the front foot, offering their expertise in investment and administration to the private sector. I also argued that the LGPS could act as a DC consolidator, converting DC pots into LGPS index linked pension using a facility it had in place but did too little advertising.

There were one or two people I spoke to who I have met since but no enthusiasm for change. Why should the LGPS change, it was sitting in such a comfortable position with huge surplus and jobs for lives.

Pensions UK, who are major beneficiaries of LGPS support and who run these conferences have sprung to action within hours of this news

When the news broke, I was with Unison’s pension people (who I have considerable respect for). We were exploring how LGPS could take on new workers and pay them DB pensions , agreeing that some employers can enter LGPS but have not the strength to do so. Ironically we were thinking about a CDC scheme for some workers. I was not aware of Reform’s plans at that time, here laid out by the FT

As part of the pension plans, Reform said that new workers joining the LGPS would be offered a defined contribution pension, with the defined benefit element to be closed to new members. The pensions of existing council fund members would be unaffected.

These changes are part of a range of changes, including the “de-woking” of the £500bn fund in a language that reminds me of Donald Trump. Unsurprisingly, the Pensions UK has now jumped into action.

No doubt we will not have to wait till June when the next LGPS conference organised by the Pensions UK for LGPS to discuss the threat to it. They will have several sections in Edinburgh at the Pensions UK Conference in March.

The reality that Pensions UK and the pensions bubble see is not the reality which Reform councillors and the millions who have voted for them so far see. In May there are more elections and Reform are predicted to take a number of Local Authorities and with them power in the management of LGPS. If Reform were to become our next Government it is clear that change will not be from within but exposed from outside the bubble.

I do not agree that LGPS should be converted from what it is , because it is a success and as Glyn Jenkins of Unison described pension reform

“change is rarely beneficial and very expensive to implement”

I think that LGPS has been complacent and frankly lazy in its working with the employers and most of all the councils that have paid heavily into it when liabilities appeared  expensive and contribution rates were demanded that crippled councils and participating employers in it.

It was eager to demand money to get out of deficit but LGPS in its 100+ schemes (if you include Scotland) is not showing the same vigour in keeping the employers and councils out of deficit. It can and it doesn’t and that is what has allowed Reform UK to make political capital out of demanding that LGPS ceases to be DB for new entrants and stops providing support for what it terms “woke” investment measures.

I don’t support Richard Tice but I admire his populism. Reform UK are popular among working people who don’t get pensions (just pots) and who see LGPS as a gravy train for those who run it. It is time for LGPS to show some leadership and engage with the country Reform’s Richard Tice points out Reform’s proposal

 would enable councils to cut existing employer contributions to about 10 per cent, “saving councils millions and millions every year”.

The average employer contribution in the LGPS is about 21 per cent of pay.

The  pooling structure of LGPS would be scrapped and LGPS managed as one fund

The reform of LGPS proposed by Reform UK will be very popular with the country though not with the pension industry. It is what I warned would come, now LGPS must get out of its comfort zone and prove it is worth the money it has demanded and now sits on.

 

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Sharon Bowles and Ros Altmann continue to make sense with amendments to the Pension Schemes Bill

Posted on February 24, 2026 by henry tapper

I agree with William Macleod.

I agree with Sharon Bowles above and Ros Altmann below.

Sharon Bowles
Ros Altmann
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Administration as Critical Infrastructure -KGC Associates (pt. 4)

Posted on February 24, 2026 by henry tapper

This is the fourth of a series of articles from KGC Associates. Once again thanks to Hayley Mudge.

What consolidation means for system-wide resilience

Across the UK pensions industry, administration has historically been treated as a supporting function, essential, but largely invisible when it works well. Structural change in the administration market is challenging this assumption. As providers consolidate, platforms concentrate and capacity tightens, member outcomes are increasingly exposed to the shared dependencies within administration across the system.

These developments matter beyond individual schemes or providers. Consolidation and exit have concentrated operational risk within a smaller set of organisations. At the same time, the people, processes and transition capability required to deliver administration are increasingly shared across the market. This means disruption in one part of the system can have indirect consequences elsewhere, even where direct relationships remain unchanged.

From an industry perspective, this raises questions about resilience, sequencing of change and collective capacity. The issue is not whether consolidation is rational, in many cases it clearly is, but whether the market as a whole retains sufficient ability to absorb change without increasing risk to service continuity, member confidence and industry reputation.

This section considers what it means to view pensions administration as critical infrastructure rather than a routine outsourced service. It explores why operational risk has become more concentrated, how regulatory interest is beginning to reflect this shift, and why resilience now depends as much on coordination and governance across the market as it does on the performance of individual firms.

Article content

Administration has become a control point in the pensions ecosystem

Administration now sits at the intersection of:

  • data custody
  • member experience
  • regulatory compliance
  • scheme decision-making

It’s no longer about retirement calculations or transfer quotes, administrators have needed to diversify their skillsets away from following processes and calculations to being a sympathetic ear to a bereavement case, understanding how to deal with a pensions scam and being able to interrogate data alongside trustees. Administration has earnt its place at the table and is finally being valued in line with investment decisions and advice from the Scheme Actuary.

KGC insight:

This elevates administration from a back-office function to systemically important operational infrastructure, requiring a corresponding shift in trustee governance, sponsor oversight and regulatory focus.

Considerations for trustees:

If administration is critical infrastructure, then it must be governed, invested in and overseen differently than routine business process outsourcing:

  • Administration risk is no longer just a supplier-management issue, it’s a core governance risk, alongside funding, covenant and investment
  • Trustees should treat administrator stability and capacity as standing agenda items, govern ownership change, platform change and transitions proactively and be more strategic in their questioning. For example, instead of ‘are we getting good service?’ ask ‘is our administrator structurally resilient?’
  • Scenario plan the consequences of administrator ownership change, restructuring or exit for them, the sponsor and their members

Considerations for sponsors:

This reframes administration from an outsourced cost to a critical operational dependency. Administration failure is no longer an operational inconvenience, it’s a business and reputational risk, sponsors need to:

  • Understand how administration failure or instability affects payroll, member trust and reputational risk
  • Scenario plan the consequences of administrator ownership change, restructuring or exit for them, their trustees and members

Considerations for Regulators

As pensions administration underpins benefit accuracy, payment continuity and member outcomes, disruption increasingly has cross-scheme consequences rather than isolated impact. Regulatory interest is already beginning to reflect this shift. There is growing recognition:

  • Provider exits and consolidation concentrate operational risk
  • Large-scale migrations amplify delivery and data risk
  • Capacity constraints limit the pensions ecosystem’s ability to absorb change

Regulatory focus is moving beyond individual service failures, towards the resilience of the administration ecosystem supporting member outcomes.

New entrants only emerge from disruption, but there is interest from overseas

Alongside disruption-driven entry, we continue to see interest from overseas-owned groups seeking to access the UK pensions administration market, either through acquisition or direct entry. However, there are high barriers to entry in modern administration.

In practice, many prospective entrants underestimate the structural complexity of the UK environment, particularly the deep operational interdependence between DB and DC administration. For organisations accustomed to more homogeneous, DC-only markets, the UK’s long tail of DB schemes, with benefit-specific rules, historic data challenges and scheme-by-scheme customisation presents a material barrier to scale, operational clarity and risk control. This has historically constrained successful greenfield entry.

As the market continues to tilt towards larger-scale DC arrangements and master trust administration, there are early indications some of these barriers may be weakening. Platform-led propositions, including newer administration platforms entering the UK market suggest prospective entrants are seeking to decouple technology from legacy UK operating models, rather than replicate traditional administration structures wholesale. Whether this approach can translate into sustained competitive entry remains to be seen, but it indicates a gradual shift in the structural dynamics historically limiting overseas participation.

As DB becomes a smaller proportion of new business, future entrants may find the market more accessible. Sustainable participation in the UK market currently still depends on:

  • demonstrable DB capability
  • disciplined migration and transition governance
  • experienced people and resilient delivery models

KGC insight:

The market is mature and operationally complex. Innovation tends to come from restructuring existing capability rather than genuine greenfield entry. The UK administration market has not lacked overseas interest. It’s lacked operating models capable of absorbing DB complexity at scale. Although technology may lower barriers to entry, it does not remove multi-layered operational demands.

In our experience, increased overseas and platform-led interest does not reduce procurement risk, it changes its shape. Selection decisions with over-weighting on technology or price, without evidence of delivery through UK-specific change and complexity, could materially increase transition and service risk.

Risk has concentrated, not disappeared

While the number of providers has reduced, the scale of individual administrators has increased significantly, each one:

  • supports more members
  • holds more legacy data
  • runs more migration simultaneously

Systemic risk is now concentrated, a major platform and/or business failure would affect:

  • hundreds of schemes
  • millions of members
  • multiple trustees at once

KGC insight:

From a system-wide governance perspective, the industry now carries more concentrated operational dependency than it did a decade ago. Resilience depends not just on individual organisation performance, but on collective standards, transparency and operational discipline.

Bringing this together: resilience at system level

Viewed through an industry lens, the evolution of the administration market points to a clear shift in where operational risk now sits. Administration has moved from a largely invisible supporting function to a central control point within the pensions ecosystem, underpinning data integrity, regulatory compliance, member experience and scheme decision-making.

Consolidation, exit and platform concentration have not eliminated risk, they have redistributed it. As providers grow in scale and complexity, and as capacity, skills and transition capability become increasingly shared, the consequences of disruption extend beyond individual schemes or organisations. The ecosystems resilience now depends not only on the performance of individual administrators, but on how change is sequenced, governed and absorbed across the market as a whole.

As regulatory interest continues to evolve in this direction, and as trustees and sponsors reassess their own dependencies, the focus increasingly shifts from isolated service outcomes to system-wide resilience. The question for the industry is no longer whether administration can scale, but whether it can do so in a way that sustains confidence, continuity and member outcomes over time.

The Bigger Picture: The next phase of market evolution

The UK pensions administration market has consolidated structurally but we believe it remains operationally fragile during periods of change. While the number of providers has reduced, the complexity, scale and interdependence of administration activity has increased. Risk has not been removed; it has become more concentrated and, in some cases, less visible.

Consolidation has brought clear benefits. It has enabled greater professionalisation, investment in systems and controls, and the development of specialist capability. At the same time, it has increased reliance on a smaller number of delivery platforms and organisations, each supporting larger member populations, holding more legacy data and managing multiple, overlapping transitions. This concentration is largely unproblematic when change is limited, but it becomes more exposed when the market is absorbing exits, migrations or operating-model redesign.

For trustees, this elevates administration oversight from a supplier-management activity to a core governance responsibility. The quality of BAU remains important, but it’s no longer sufficient as a proxy indicator for long-term resilience. Administration risk now has a direct bearing on member outcome and scheme risk.

For administrators, consolidation sharpens the importance of strategic clarity and operating discipline. Scale alone does not guarantee stability. Resilience appears more closely linked to how clearly administration is positioned within the business, how consistently investment is sustained, and how deliberately change is governed and absorbed over time.

For the industry, these dynamics underline the extent to which administration now functions as critical operational infrastructure. Disruption no longer affects individual schemes in isolation. Capacity constraints, large-scale migrations and provider exits have cross-scheme consequences. There should be an appreciation of shared dependencies and standards across the market.

In our view, the next phase of market evolution will be defined less by the pace of further consolidation and more by how effectively the industry governs and absorbs change

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CDC’s been declared unfair; we say it’s up to 60% fairer for everyone!

Posted on February 24, 2026 by henry tapper

This article, written by my colleague Chris Burford and me is a defence of CDC from accusations that it simply redistributes the same amount of money away from one group (the young) to another (the old). Our argument is that by investing over the whole of our lives in growth assets we create more money for distribution. CDC does not hold buffers against failure but, as we show, it has inbuilt protection to ensure everyone is treated fairly all the time.

It first appeared in Professional Pensions

 

As CDC enthusiasts and people who are committed to finding a way for pensioners to enjoy a substantial annual income in retirement without making complex investment decisions, we are delighted that the pensions industry seems unified on the CDC performance debate.  Whether CDC schemes outperform standard DC by 20% or 60% is a matter of assumptions and perspective, but it’s generally agreed that

“Through pooling of longevity risk, and adopting a higher return-seeking investment strategy, CDC can offer a higher expected income for life than alternative approaches.” 

Those are the words of John Southall of L&G in his recent Professional Pensions article.

With the superior pensions that come from CDC accepted by Government, some are asking questions regarding other aspects of CDC design, in particular the volatility of future outcomes and the fairness of various designs with a focus on “intergenerational fairness”.

We also think there is confusion between flexibility that a DC pot offers and a retirement income for life – we cannot make a pension as flexible as a pot of money but we have been paying pensions for over a century and people seem to want them!

We are working hard to bring a whole-of-life CDC design that is a UMES (Unconnected Multiple-Employer Scheme) into the world and have considered carefully the impact of design features on both volatility of outcomes and fairness between different employers and between the memberships of those employers.  We outline below the key design aspects we believe can make CDC fair for every generation.

Contributions converted to CDC pension on cost-neutral terms

The Royal Mail CDC scheme can afford a level of cross-subsidy between its members, with a single contribution rate earning a 60th of pensionable salary. The pension accrual works as it does for DB schemes – the young overpay to begin with but get a good deal out of later life contributions. It’s a whole career approach which is right for Royal Mail but not for multi-employer schemes where one employer will not wish to subsidise another employer’s membership.

To ensure fairness between our unconnected employers we intend to employ a more dynamic approach to pricing.  Contributions will be converted into CDC pension on terms which are:

  • Age-related – it is cheaper to provide a pension to a younger member than an older member, as their funds will be invested for a longer period before pension is paid. Fairness dictates that this difference is reflected in the pricing.
  • Gender-neutral – it could be argued that because women on average live longer than men then a male contribution of £1,000 should buy a higher pension than a £1,000 contribution from the same aged female. The employers we have spoken to are generally keen that £1,000 of contribution buys the same pension for all members of the same age, and therefore gender-neutral conversion factors will be adopted.
  • Fully reflective of the scheme experience (level of pension increases) to date -the pricing will fully reflect the level of future pension increases expected. This won’t just be reflective of the increases calculated at the last annual actuarial valuation, but will include more recent experience to ensure some members cannot “game” recent market movements.

Regular changes to conversion factors to reflect up-to-date experience are what we refer to as “dynamic pricing”.

Investment strategy is pre-determined

We hear a lot of people suggesting CDC schemes need a constant flow of younger new members to be able to maintain the returns-seeking investment strategy that produces the superior member outcomes.  Whilst we can see why people might suggest that, it’s not true.  Members’ expected pensions don’t fall if the scheme accepts no future members or contributions.

This is because the broad investment strategy is pre-determined, and whilst the Trustees will be able to adjust the individual investments as they see fit the overarching strategy will remain unchanged.

A potential CDC investment strategy is outlined above.  When members’ contributions are converted to CDC pension, they are converted on the basis that the funds invested on behalf of the member will move over time in line with the prescribed strategy above.

This strategy can’t significantly change – CDC regulations will require a new section be opened if that were to happen.  So, if the scheme were to close to new members or contributions then the scheme would end up invested more in matching assets, but that would be planned and not change the benefit expectations of the existing membership.

There are other issues a CDC scheme would face if it closed to new members or contributions, including having to sell assets to pay benefits and ensuring that the charges on funds were sufficient to continue paying the administrative expenses of the scheme; but there is no fundamental change in the expected benefits of the existing membership.

As time goes by, we suspect there will be no need for CDC schemes to continue running on with older memberships – it should be possible to transfer a closed CDC scheme into a continuing open CDC scheme.

An indexation approach to adjustments (where possible)

UMES CDC legislation requires adjustments for experience to be made to future pension increases within certain bounds, and if the experience is outside of those bounds then one-off increases or reductions in benefits are permitted.

The benefit of spreading experience across all future increases is a significantly reduced volatility of member experience – members’ pensions don’t increase far from the expected level except in times of significant divergence from expectation.  One-off increases or reductions are highly unlikely.

If you still think intergenerationally unfair – in which direction?

The debate surrounding intergenerational fairness in CDC schemes reminds us of the time that employer covenant was first intended to impact the level of deficit-reduction contributions DB Trustees asked of a sponsoring employer.  It could be argued both ways whether a strong employer covenant was meant to imply a higher level of employer contributions (because they could be afforded) or a lower level of employer contributions (because employer support could be relied on for longer). Somebody asked this at a pension talk and the speaker was unable to give a definitive answer.

There are those that think older members are benefitting from, and maybe even exploiting, the existence of younger members in the scheme.  There’s no doubt that older members will get a great pension from CDC schemes, but there’s plenty to suggest that younger members will get an even better deal from joining a CDC scheme:

  • The low cost of CDC pension for younger members – Conversion factors will fully reflect young members’ term to retirement, and we could easily see younger members getting 4x or 5x as much CDC pension for the same contribution as older members;
  • A longer period of CDC “accrual” – whereas older members are likely to have been invested in a DC scheme for a significant portion of their working lives, younger members will benefit from earning CDC benefits (and the additional 30% – 60% pension without difficult investment decisions that represents) for longer.
  • The benefits of time diversification – older members benefit from the experience affecting their pension being spread over a number of years, but younger members benefit from experience over a greater number of years being spread across the scheme’s lifetime. This can be illustrated with the example of each year’s investment returns represented by the roll of a dice.  If you throw one dice, there’s a reasonable chance your average score will be 1 or 6.  If you throw 50 dice, the “law of large numbers” means the average will almost certainly be close to 5[1].  Younger members have a longer time to experience highs and lows in investment returns meaning their annual return is more likely to be closer to the average than older members.

In a world where house prices, university fees and student debts, climate change and AI ( “taking their jobs” ) are all against our young people, let’s recognise CDC pensions as the incredible benefit that could be for their generation.

Let’s keep educating people on pensions and supporting CDC

The shift in CDC conversation, from “if” to “when will we see mass CDC membership”, has been exciting to see.  Greater understanding of CDC schemes within the pensions industry is the first port of call.

It means that the benefits and risks can be discussed knowledgably by the professionals that company leaders and pension scheme members trust. HR departments will need answers.

You can try to swim against the tide, but sooner rather than later HR leaders will be coming under intense scrutiny from their pension members.  Members in DC schemes will be asking why their pension contributions are not working as hard as CDC schemes do.

There is only so far you can go by arguing for the flexibility of drawdown and of cashing out; we hear people asking for a pension from the pension scheme they’ve been saving into!

Chris Bunford and Henry Tapper of Pensions Mutual

[1] We note that annual investment returns are not wholly independent of each other, but the basic principle holds

People want to read good news stories about CDC. That’s because CDC is good news!

 

 

 

 

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Wolverhampton folk demand LGPS returns £11bn surplus it’s sitting on.

Posted on February 24, 2026 by henry tapper

John Clancy and David Bailey have blogged about the enormity of the wrong to the West Midlands council tax-payer by the LGPS.

Their latest blog says that money returned to Birmingham is not enough and that Wolverhampton has the same problem

Mike Olley

This is not news to this blog, it’s a smouldering issue that’s not going on; it’s a big scandal that has not been addressed and infuriates people outside the pension bubble.

The LGPS needs to get a grip on its responsibilities and return un-needed money to councils so council tax payers get the services they have paid for. The LGPS pension fund does not need to be over-funded, indeed it is a scandal that the Wolverhampton is bust while its pension scheme has an £11bn surplus (see blog by  Clancy and Bailey).

Surpluses and deficits are immediate for council treasurers but abstract for the LGPS who can and should  manage its finances over generations.

How Clancy and Bailey see the LGPS

Clancy and Bailey may be a bit harsh for pension folk.  They are followed up by  Mike Olley on Linked in who writes to pension people- with the same message

There is no “prudence” in holding back money that has been paid into a pension scheme unnecessarily by ordinary people though high council taxes. That high council taxes leave Birmingham bereft of the services council tax payers rightfully expect is shameful. But when the shame of lack of services could be righted by the return of money that should not have been taken and is not needed by the pension funds,  then there is a scandal.

Professional Pensions is right to pick up on this and pension people have a chance to have their say to ensure that the LGPS do not continue to sit on dead money.

In this week’s Pensions Buzz, PP wants to know if councils should offer Local Government Pension Scheme contribution holidays to fund services.

It is not enough to sit on our hands and pretend that this is not our problem. What is happening in the West Midlands is a disaster for pension’s reputation everywhere

Take part in the survey here and make your feelings fealt in the comments box.

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Is the VFM Framework the end for DC workplace pensions?

Posted on February 23, 2026 by henry tapper

An elderly actuary pings me a message about the VFM Framework

I joked about the VfM framework before…

 

However there is an alternative way of looking at it.
Here is how it might improve outcomes.
1. It will be troublesome to produce and annoying for many trustees and providers to deal with.  Alongside the other new demands, it will push the  many legacy closed  “pension” arrangements to consolidate somehow.  Much faster.
2. It will push all AE default arrangements to invest broadly similarly.  As  the basis of AE is inertia combined with joining being the only way to get the employer’s contribution,  and individuals don’t have any choice  where there money goes, there is no good reason why their money should be invested differently depending what their employer choses.
A sledgehammer to crack a couple of nuts. But let’s get it done and move on to VfM on decumulation.
Or more radical changes.

I don’t know if my actuarial friend had read what Nico and Darren had said over 95 minutes on their podcast

But his/her thinking is along the lines of Nico and Darren in that there really isn’t much to choose between master trusts when they get to a certain size. This is the problem they have in Australia where the systemic problem that Supers don’t pay retirement income is ignored as the press argue about which Super will deliver more in years to come.

My friend is right to argue that we should shift our thinking to more radical changes to the DC system so that people get pensions and not pots when they need their money back.

I am not against flex and fix as advocated by Nest who will offer flexibility till your 85th birthday and then fixed income with no flexibility. If that’s the end game for a saver in a master trust – good. Good that people have an income at 85 for as long as they need it. I have said this much on this blog for a year, since Paul Todd told us about it.

But while “Nest’s flex and fix” approach is as good as a large DC scheme gets as a way to provide DC pensions, it is not as good as being in a CDC for the whole of your life.

I hope that people will remember the DWP and HMT’s statements on the value we will get for our money  from CDC compared with DC

I can see a future for Nest and People’s and I can see some master trusts getting to scale and surviving . Insurance companies and pension consultancies may continue to play in the future. Consultancies  because of the hold they have over large companies who rely on them to manage the end game of their DB schemes . Insurance companies have a strong hold on the large part of DB schemes who want to buy-out and  Insurance companies have massive legacy books of personal pensions.

The insurance will have annuities as an endgame and flex and fix sees the 85 year olds buying their annuities. The consultancies such as WTW, Aon and Mercer will find retirement CDC and maybe whole of life CDC worthwhile.

My friend is  right to point out that the only Framework we will need is the VFM the  pensioners and annuitants get. DC will have to point to the freedom of drawdown if it is to compete against one CDC. It will struggle, at least with employers who care.

Meanwhile, I can’t see much but consolidation for the smaller master trusts and the GPPs. As Nico and Darren point out – you don’t need a VFM Framework to have a consolidation happening, you probably need a scale rule and you have it in the Pension Schemes Bill. When that Bill is enacted in the next few weeks, any point of the VFM Framework disappears.

And Pension Dashboards will show pensions not pots. The end for master trusts is not imminent, but their importance to the nation’s thinking will diminish as people think of pensions as what they’re saving for.

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“We shape our tools and thereafter our tools shape us”

Posted on February 23, 2026 by henry tapper

This article arrived as my free lunch last Sunday. It is an amazing piece of work. I hope I do not scramble your brain by asking you to engage your brain with Tej’s thoughts.

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David Butcher ; the trustee salesman’s views offered with conviction

Posted on February 23, 2026 by henry tapper

Britain’s trustee salesman – David Butcher

I told you that these VFM podcasts are getting a lot better this year. I thought that I would have to bring my praise to an end when I discovered that the second interview with David Butcher was 77 minutes long

But this podcast includes an 8 minute meditation at the end which  I can recommend as I did it and because I’ve done a lot of his meditations as I did his course with him in Shoreditch and have all the kit to DIY mindfulness whenever I want to. This stuff doesn’t come cheap and the first 20 minutes of this podcast is David explaining why more people should like me , sign up and pay for a course.

But you don’t need to do any more than listen through to minute 70 and find out for yourself. Or you can scroll through if you don’t do VFM as a concept!

What is VFM?

As with so much else in this podcast, the insight is at the end (after a long story of how David became Jimi Hendrix’s stage manager and the mixer of his band’s live sound). Minute 70.

Following which Darren bids David goodbye only for David to reply,

Before I go I must tell you my verdict on the VFM consultation. It’s a masterpiece of analytic thinking but there is zero of emotional thinking in there”.

There is another response on this consultation from Darren and Nico this week which I have commented on  here. But when not selling himself, David is spot on about the failure of Government and its regulators to use the VFM Framework to engage Britain’s population.

One strategy for Commercial Provider and Trustee?

The main part of this podcast is David explaining how important a strategy for a commercial master trust is and how it is seldom agreed between the trustees and the provider.

This is surely right. What we have seen so far from commercial DC schemes is a grasp for size with little strategy around being a “pension” or of VFM other than a race to the bottom on pricing. The idea that a strategy might be based on maximining the pot let alone the pension coming from it has not been explained to employers and members and I suspect the strategy explained to TPR is based on staying compliant.

Sadly, we do not get a view of what the trustees and provider’s strategy could be though I can see nothing more important than the size of pension payable when the member wants the money back. I can see the strategy varying in terms of decumulation but in all honesty, is there a strategy that trustees and providers sign up to other than to maximise accumulation? ESG, reflating the British economy and financial education of members may have value but the value for money in terms of outcome is what the strategy must focus on.

David wants emotional intelligence as well as artificial intelligence going forward and he is so charming that it is easy to miss the bitterness he shows for 15 years as a trustee with so little progress in creating strategies based on a mindful application of the emotions of the people involved. At one point he remarks that only 10% of us have sufficient emotional intelligence to understand what it is.

I was enlightened by David’s comments and will use them in creating a strategy for the CDC , I and my team are looking to put together.

A trustee salesman – does this work?

A precious podcast which gives us an even better line on the VFM project than Robin Ellison’s. It also gives us an insight into David’s view of a trustee’s role. When David was head of Sales at Invesco around the turn of the century, Emma Douglas was head of Threadneedle at a time when corporate DC pensions were emerging through GPPs and the first occupational DC schemes. The DC trustee was infact a DB trustee extending their side job of choosing DC AVC suppliers.

I was at Zurich doing the same job and DC was thought something that would liberate people to do as they wanted before buying an annuity. The idea of a DC pension – paid from the pots individuals were starting to build was not considered. The strategy of DC pensions was to build up money to “buy out”- which is why they were known as “money purchase”.

David was head of sales and to me he has always been close to the providers. That is why he had been so popular with DC “pension” providers. He started life selling L&G pensions  as he tells us and the Pension Regulator’s idea that Trustees should not sell CDC to members must remind him of his being told off by his L&G bosses for directly selling to L&G customers.

Herein lies the interest in this very interesting podcast. Should we have salesmen on trustee boards, David is a salesman trustee and you can decide whether trustees should be like him. I imagine many will think the trustee and commercial provider should not work to one strategy.

 

 

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