Luton’s not much of a place, but neither is Yeovil. I’ve been to Kenilworth Rd twice – to watch the two play. I never expected to be watching the greatest club sides in the world play there, but that’s what will happen next season.
I didn’t see much of the game yesterday but listened as I travelled. Tom Lockyer’s collapse was terrible to listen to on the radio but worse still to watch on catch-up. I like this shot much better!
Luton lights up hope for teams like mine. We can dream their dream but getting promoted from National Conference to Premier League is a lot harder than blogging about it.
I caught the penalties and the celebrations after. I watched the fight at the Vitality and thought of how Bournemouth were resorting to bucket collections to keep going a few years back.
Then there’s Tom Lockyer , captain now of a Premier League side though who knows what all those pads attached to him will tell him.
I wish him well , I hope he gets to see this fabulous May day and gets home soon!
Well done Luton, you’ve done yourselves proud. Coventry, your time will come!
I have offended my friend Darren Philp using this blog to characterise he and Nico Aspinall as pension’s Chuckle brothers. I’ve ripped into Nico for being a pensions patrician and criticised a bunch of well meaning pension companies for creating a club which I called woke.
Boy, I must have been in a bad mood yesterday!
These are my views, I don’t withdraw them , though I wish I hadn’t hurt my friend’s feelings. I have been on the end of some pretty ugly stuff on social media myself. Of course Darren will get the support of the bulk of people on social media and that’s right too, these are nice guys. Darren’s called out my attack on linked in and you can read what he has to say here.
Putting it out there
There is barely any debate on pensions that is not sponsored by a commercial desire to be right. I don’t claim to write without a commercial intent, my businesses are about delivering things that pay my companies and ultimately me.
Similarly Nico and Darren have commercial agenda which they pursue in alignment with their beliefs. Nico’s work on sustainability and the capacity of funded pensions to make a difference to the planet are evident in every one of the 18 pots. I have worked with Darren on projects such as “net-pay” and know that he is a genuine believer in causes such as equality of pay and pensions for women and men,
That these guys are genuine is not in doubt, at least in my mind.
And they have every right to put there views out there – as they did in their latest pod. Putting it out there is what it’s all about, getting a broadside from me is a risk that Darren and Nico expect and that’s no bad thing either.
“Ad hominem”
I hope that many people will listen to Nico and Darren’s latest pod, long as it is, and read my blog.
The 17 podcasts that have preceded this one , have included a lot of criticism not just of Nico and Darren but of the way things have been said, the attitudes and the proposals of those on the podcasts – especially the guests.
Darren is worried that my comments will lead to people not wanting to come on the pod. I can see that too. But I’d point out that without my blogs, his podcasts would not get the publicity they deserve. Every time I write, I encourage people to listen and I encourage you to listen to the latest pod as part of this.
Directing criticism against a person rather than the opinion they express is “ad hominem” – a bad thing. And social media makes ad hominem comments all too easy.
However, unless we have personal conviction, then social media would be no more than a series of corporate positions. I could not disagree more with Nico especially for the views he expresses but I like him and Darren no less for revealing what to me is their other side.
Knowing when an attack on people’s views becomes an attack on their person is a fine judgement call and I can see from Darren’s reaction on social media that he thinks I am on the wrong side of that line.
That we can have this discussion without resorting to law is a good thing. That the very important issues raised by Nico and Darren and criticised by me, can get traction on a bank holiday , is another good thing.
If people will not enter into discussion for fear that their views will be challenged openly then there is the Chatham House rule. But podcasts are not under that rule, people who put it out there, ultimately must expect a reaction.
So though I command the bully pulpit , I am conscious of responsibilities to people’s well-being and will respond where people explain that they have been offended. I expect a lot of personal criticism for my outspokenness and get it. But offending a freind is a mistake – Darren, please accept my apology!
The following article is extraordinary. Until a few weeks ago, the Government’s Pensions Regulator was urging small and underperforming pension schemes to demand employers pump money into them so they can buy risk-free assets in a process known as “de-risking”.
For a decade these schemes were locked into LDI strategies where employers were steadily tapped for deficit recovery contributions and schemes inched back to solvency by taking a huge bet that interest rates wouldn’t rise. In 2022 interest rates rose and the good work was undone as they found themselves trapped in funds they clearly didn’t understand. This saw them were shorn of assets and often the expensive insurance they’d purchased against inflation rises.
Many of the small schemes have only recently found that their funding strategies have been sunk below the waterline. At a PMI session on the liquidity crisis last week, it emerged that some pooled funds were only informing DB scheme clients they had lost their hedge at the beginning of March.
Now these schemes are contemplating complying with the Pensions Regulator’s DB funding code which demands more of the same. The Pensions Regulator marched them up to the top of the hill and marched them down again. Compared to more of such pain, many employers and their trustees may be ready to hand the keys to their scheme to the Government’s lifeboat.
Pension funds have been urged by the City minister to embrace a “culture of risk-taking” as the Treasury draws up plans to bolster returns for savers using an industry lifeboat.
“We are working on removing points of friction, streamlining our regulations and encouraging a greater culture of risk-taking.”
Jeremy Hunt, the Chancellor, is understood to be considering plans to hand control of underperforming schemes to the Pension Protection Fund (PPF), which currently protects people in retirement schemes when their employer goes bust.
Officials are considering how they can encourage small, poorly-performing defined benefit (DB) funds – old-style pension plans sponsored by an employer, which pay out a guaranteed proportion of a worker’s income when they retire – to fold into the PPF, creating a superfund that can invest in a broader range of UK high growth assets.
Treasury sources said the idea was one of several options under consideration, but it is understood that altering the PPF’s powers would require complex changes in the law and could not be rolled out before the next election.
The government-backed body already manages almost £40bn and was forced to step in and run the schemes of Carillion and BHS when the companies collapsed.
A Whitehall source said: “Under no circumstances should we be mandating.” A Treasury spokesman declined to comment.
The Tony Blair Institute will recommend in a report next week that sponsors of the smallest 4,500 DB schemes should be allowed the option of transferring to the PPF.
It will point out that although the UK has the third largest pension market in the world, no individual fund is in the global top 40.
The institute believes consolidation could transform the PPF into a superfund of around £400bn, making it one of the biggest in the world.
Mr Griffith said that pension fund managers are not currently being incentivised to deliver higher returns. He said:
“[We have to] move the emphasis away from funds running themselves for the minimum cost to funds looking properly at performance and that is what matters here because it is about making sure long-term savers get the most prosperous retirement that they can.”
Sir Nigel Wilson, chief executive of Legal & General, said Britain’s pension schemes were failing to support growth industries such as bioscience and risked holding back the economy.
In a sign of a change of direction, the boss of The Pensions Regulator also pledged to go after the trustees of struggling funds that are letting down their members.
Mr Hunt will on Friday announce plans to earmark £250m of taxpayer cash for the Treasury’s Long-Term Investment for Technology and Science (Lifts) initiative, intended to spur the creation of new investment vehicles for pension schemes to back British science and technology.
Mr Griffith said:
“The £250m will be used to seed a new vehicle aimed at defined contribution pension schemes, allowing them to invest in scaling up some of the UK’s most innovative companies.”
The Treasury will launch a call for proposals alongside the announcement.
Baroness Altmann, a former pension minister, welcomed the move, adding:
This Lifts fund is just a small story, but there are billions of pounds of pension money that could and should be directed to benefit Britain.
“By offering new investment ideas and long term growth projects for new companies, or desperately needed social housing and infrastructure, pension funds could enhance returns.”
There is growing concern that pension funds are increasingly pulling back from stocks and investing instead in safer but less lucrative assets such as bonds, in a growing problem known as de-equitisation.
Mr Griffith said:
“De-equitisation is a long-standing feature of the market and it’s been a concern for some time, it’s not new. People have alighted on it more recently but in policy circles and in the Treasury, this has been a concern.
“It’s fully one of the things we are focused on when we think about the reforms to the financial services sector generally and pools of trapped capital whether they be in peoples’ private savings, in institutional capital such as the work we’ve done on Solvency 2 and to pension funds themselves.
“It’s a combination of changing the culture of risk, removing some of the frictions at pace… and bringing forward new vehicles for investment in equities or high growth sectors such as Lifts.”
OK – not all of this is right. Rachel Reeves didn’t rule out mandating investment in venture capital but that’s along way from adopting the idea.
Tony Blair’s estimate that the PPF could increase tenfold in size to £400bn is a number plucked fr0m thin air. By creating a benchmark for DB schemes , the PPF can do what Nest is doing and raise standards. Most importantly, it can recreate an investment culture within DB schemes – rather than the cruel parody of corporate finance – that the funding of DB schemes has become.
The PPF would have to compete for business as Nest competes and there’s the rub, like Nest, it would likely get low value business , but as with Nest – this doesn’t really matter. It is unlikely that the PPF would create a false market and for every scheme taken on, another employer would be released to get on with doing the day job,
Take a guest out of Nico and Darren’s VFM podcast and you are left with the Chuckle Brothers of pensions without the constraint of a third party. This leads to some pretty strange stuff, especially from Nico who now aligns himself with the patrician elite who run our workplace pensions.
Nico has come round to the opinion that VFM is actually destructive of value as it gets in the way of a better discussion of adequacy. He claims that “we are being pushed off the ball” of “outcomes” in favor of the Government’s consolidation/productive finance agenda.
“Never mind the efficiency, feel the width“. This view is shared by the bulk of the pension industry to which Nico may be a “mean reverter”. This bulk would like to have our money , the taxperson’s money and our employer’s money and sit on it for as long as possible – preferably well into retirement. It is after all entitled to a return on our money and has no interest in plebeian scrutiny.
This view suggests that simple tests on performance, quality and apportionment of costs are neither here nor there as all commercial providers are worthy their place in the premier league without fear of relegation, If you support Arsenal, you can think like this, if you support Southampton, you may feel differently.
Club woke – the paternalists alternative to VFM
Early in the podcast, before Nico declares himself a member of the patrician elite, he hints that the podcast may be due a rebrand. Perhaps it should align itself to the PEG – ” a loose affiliation of millionaires and billionaires” dedicated to eliminating pension inequality by meeting up in each other’s City Offices. The paternalistic elite have to find some way to justify themselves and if it’s not VFM – why not “club woke” – dedicated to virtue signalling.
Perhaps I am being distracted by Darren’s claim that I am a fan of the VFM blog. I am neither a fan nor a detractor, I have lashed myself to the mast for an hour or two a week to comment on what is said and by and large it has been time well spent.
The big themes of the 18 hours I’ve listened to appear to be
The VFM framework should include retail (non-workplace) pensions
The VFM framework should include decumulation
There should be more of an onus on employers to sort things out
To this we should add that VFM is best put in the hands of the paternalistic elite and not simplified to a point where ordinary people think they have an idea of what is going on.
There are some big issues emerging out of this consultation. Perhaps the biggest is the Government’s objection to the “race to the bottom” on pricing – which is the unexpected and unintended consequence of handing the decision to consolidates to plebeian procurement teams. A discussion on how the pensions industry will ever get beyond “asset management for free” which is what is happening to most workplace defaults, would be worth happening.
I suspected that this was too contentious for the Chuckle Bros, but I reckoned wrong. The last ten minutes of the podcast contain an extraordinary statement from Nico endorsing a fee crunch, rejecting arguments for productive capital and advocating passive investment for the proles.
This is a u-turn from the recent CIO of Connect and People’s Pension and one I don’t get.
I want Nico to focus on the events of 2022 and just who should be held to account for the wholesale destruction in value. We need to call out serial offenders destroying value and name them -saying their are no mastertrusts who don’t provide VFM is wrong.
A discussion of the appalling service standards surrounding transfer times , the management of death claims , the lack of support at retirement and most of all the failure of this sector to give people proper performance metrics WOULD BE INTERESTING.
VFM reverts to mean (paternalistic elitists)
But all of this sounds not very urgent because as Nico and Darren admit, they haven’t established what the purpose of these “pensions” is and therefore have no anchor on that value for money should be. The Australians have sorted this, the common purpose of retirement system is to give people an income in later life that gives them dignity.
The purpose of the VFM framework is to deal with one aspect of the retirement puzzle, the need to maximise efficiency of saving, if we are to have a funded DC system we need to get that right first. People need a way to judge value for themselves, the VFM framework is about making this happen for ordinary employers.
Ordinary “plebeian” employers will be consoled that so long as they move money into a magic circle of commercial master trusts , they have provided value for money for their staff. Staff can be dealt with by high quality communications , validated by industry awards. Past performance can continue to be a matter of disdain while what really matters, the simulation of future returns, can remain the province of the paternalist elite (aka actuaries)
If you subscribe to this way of thinking , you will probably ignore the VFM consultation. But if you don’t I suspect you will find the consultation response as exciting as promised by the CEO of the Pensions Regulator this week.
As the FT reported yesterday, the Treasury appears to be mulling over breathing fire back into DB by converting the PPF into a means for the sponsors of small and struggling DB schemes to offload their schemes. This would mean the PPF rivalling insurers and superfunds as a consolidator.
Many employers have been trying this for years, closing down with a pre-pack only to “phoenix” once the pension scheme has entered the PPF’s assessment. That is not , presumably, what the Treasury has in mind.
The problem with dumping your pension scheme is the same as “fly-tipping”, it’s only good for you – and only so long as you don’t get caught.
The people who are most impacted are the members- whose benefits take an hair-cut meaning they get smaller pensions. A few years back, the Ilford Ruling made it harder for the sponsor’s executive to get out of the pension at full value (via CETVs) and fly-tip junior members, but many schemes now have sponsors who were never in the scheme. Which is why the Pensions Regulator pays so much attention to the “sponsor covenant” and spotting impending chicanery
As a result, the PPF is taking a lot less new business. What it is getting is schemes with genuinely distressed sponsors, not dodge-pots like Bernard Matthews
At a very high cost, the PPF has been “protected” by the PPF and is now a surprisingly successful enterprise that beats all the targets set for it and is fast reducing its levy on the industry as it moves to self-sufficiency. There are many who would see the levy scrapped but they don’t include the consultancy LCP who have put forward one idea for the PPF’s future.
I’ve written about this several times on here and am glad to see that when Professional Pensions asked for comment on the FT’s story. This is LCP partner David Wrigley
“This is a fascinating development, and highlights that the mindset across the industry is changing from DB pension schemes being viewed as a problem, to being viewed as an asset. These proposals would represent seismic changes to the UK pensions landscape, with far-reaching implications.”
“We think that DB schemes now present an opportunity to generate substantial excess assets over the long-term, so the obvious question is ‘who should benefit?’.”
LCP said that under the reported proposals, it seemed as if the Treasury stood to benefit – both in terms of directing investment of large pots of assets, and also presumably with half an eye on an eventual surplus emerging from the PPF.
This is a very jaundiced reading of the situation suggesting that Jeremy Hunt is no better than sponsors who ditch their schemes in a pre-pack abandoning the members who haven’t got out via a CETV.
Were this to be the case, I could see a run to IFAs still prepared to handle DB pension transfers with clients demanding a transfer value based on scheme benefits – not PPF ones.
But Wrigley said there were alternative approaches. He explained:
“We have developed an alternative approach where the PPF remains a “backstop”, but providing 100% cover.
This would mean that pension schemes would remain open with the safety net set set no lower than the equivalent benefit given up, if the sponsor went bust. Here the PPF levy becomes an insurance premium covering scheme failure (As in the Brighton Rock model) with the premium set around the amount of risk taken within the scheme. David Wrigley comments
“Under this model, the benefits of investing DB assets could be shared across DB members, sponsoring employers and the (largely defined contribution) retirement savings of those companies’ current workforces.”
This would also be handy for trustees and their advisers who would only have to hand over the keys if things went wrong. If the PPF provides equivalent benefits then the member is not disadvantaged and the only question is what premium the sponsor has to pay to the PPF ongoing and what excess they pay for or a bulk transfer of assets and liabilities.
Of course this will have profound implications for the large number of DB schemes that aren’t so set on buying out with an insurer that a plan B doesn’t come into it. LCP itself has been running seminars for small and DB schemes struggling to get bandwidth with the insurers and currently skulking at the back of a long queue.
Buy-out may be the answer for many DB schemes, as they will have seen their funding positions improve in recent times. But that market is likely to be constrained and some will prefer a different path. We think the market for innovation and new models in DB has been developing and brewing for some time, including the introduction of Superfunds, and we expect trustees will have more options available to them in the coming years.
Read into that what you want, but if I was advising a DB scheme on buying out now, I would be bringing this statement to their attention and I’d be bringing this blog to their attention too.
Does Steve Hodder have a crystal ball?
When Steve Hodder of LCP spoke to Pension PlayPen ‘s coffee morning , did he know that the Government had it in mind to restructure the PPF – or did he put that thought in the Chancellor’s mind? You can check out his comments in this important video.
“The market for innovative new products”
If Nausicaa Delfas knew of the Treasury’s cogitations over the PPF, then this proposal may have been one that she saw “brewing for some time”. I suspect that the PPF and other Government controlled pension schemes have been in the Treasury’s line of site for some time.
I doubt that uppermost in Jeremy Hunt’s mind this weekend is how DB surpluses are shared. I suspect what he’s interested in is at getting as much of the £1.5 trillion that DB schemes aren’t investing productively, back into British industry via vehicles such as Nicholas Lyons’ “Future Growth Fund”.
But let’s stick to the focus of this blog – which is protecting the PPF and members, both of which are key objectives of the Pensions Regulator. Protecting schemes is not a key objective (though trustees might wish it were).
The Pension Regulator only carries out orders, it does not set them , Delfas’ speech sounded a clarion call but what challenge is being met, will depend on who and what “we” are.
Whether the plan for the PPF is to make it a better backstop or a consolidator is largely academic if this Government cannot get legislation in place by the end of this parliamentary term.
If it doesn’t, then the plans will carry over to the next Government of whatever hue. It may be that they find merit with another party or parties but I suspect that this discussion is more about positioning for the 2024/25 Conservative manifesto , than for immediate release!
That said, the touchpaper has been lit. What LCP were discussing theoretically , now looks less of an abstraction. The PPF is (IMO) under used and under valued and it is good to see it getting attention in the press and in number 11 Downing Street.
Most of all, it’s good if this debate puts a break on buy-out. Inflation and high gilt-yields don’t look like going away soon, so we have time to consider other options than insurance. Superfunds and the PPF both have a part to play.
Somewhere over the past four weeks , a comment made to the FT by City of London Mayor- Nicholas Lyons has become a “cause celebre” for – well just about everyone!
Nicholas Lyons, the City’s Lord Mayor, told the Financial Times last month that he had held talks with the Treasury about forcing pension funds to invest in a proposed £50bn growth fund. “I would like mandatorily to have 5 per cent of [every single DC pension] put into that future growth fund,” he said, estimating that there was a pensions pool of about £2tn to draw on.
If this was designed to promote debate , it certainly has
Forcing them to “buy British” would be a terrible idea, risking lower returns — and therefore smaller pensions (for those in defined contribution schemes), or higher employer contributions (in the case of defined benefit schemes).
He’d earlier reported
The lord mayor of London, Sir Nicholas Lyons, has proposed a new £50 billion fund that would be built up by forcing all UK defined contribution schemes to allocate at least 5 per cent of contributions to it.
and he had spoken with Amanda Blanc , CEO of Aviva who
cast doubt on the wisdom of a proposed new “future growth fund”, saying it would be complex, bureaucratic and take years to set up, while the recommendation that all UK defined contribution pension schemes should be forced to fund it was misguided.
“I don’t think compulsion is ever a very good thing in free markets,” she told The Times. “I don’t think making it mandatory is a good idea at all.”
Norma Cohen tweets against market intervention, quoting Chris Giles in the FT
If private British financial capital isn’t being invested at home, it’s because owners believe it can achieve better risk-adjust returns elsewhere. Forcing UK pension funds to buy into UK business is no answer, as this excellent column points out. https://t.co/HpD9kD6Chn
Chris Giles quotes the CBI, and produces a chart that suggests that it is not capital but conviction that’s needed
and Romi Savova writes told the Sun that
“encouraging backing for a growth fund was not guaranteed to generate higher returns for savers”.
“When it comes to industrial development in the public interest, the UK has a strong record of delivering fat profits to consultants and contractors, and a less strong history of delivering great projects on time and on budget.”
By the time the Sun had got hold of the story , it had moved on from a chance remark to the FT , to a cross-party threat to a new Labour party policy
The original headline has been toned down a little
Behind this mainstream journalism is of course the vitriol of the comments on these articles. We have here a proper debate being argued at a number of levels. This is a very important debate for pensions to have, it goes to the heart of the question of what we consider “value” for our money.
it’s so important to have a proper debate about providing every pensioner with access to investment in productive assets as we face into inflation which will erode the value of long term savings. The returns for conventional pensions that invested heavily in bonds over the last 5 years are going to deliver losses as rising interest rates and falling bond prices start to bite. The contrast that we have seen in returns over the last 5 years vs Canadian and Australian pension pots that have 35-50% exposure to alternative, unlisted asset classes will start to widen much more dramatically.
He has made it clear that he is not proposing the 5% mandation – despite the earlier comment. In fact ,I can’t find anybody who is backing such an intervention now – including Nicholas Lyons!
Yet that chance comment – to use a phrase from another Nicholas Lyons’ post “has stuck like chewing gum to the sole of my foot”.
It is infact the comment that has made the debate happen. Opinion is important, especially when it comes from someone influential.
The story is the story
I expect that Nicholas Lyons is wishing he never mentioned that 5%. But he has to live with the consequences of what he said and accept that it can be taken out of context and turned against him – the story is that the Lord Mayor of the City of London said what he meant and has since taken a different view.
Had he not mentioned mandation , much of what has followed might not have happened. We might not be debating what value there is in DC funds investing in private markets. We might not be considering what we are investing in. Many people reading the articles above may not realise they are invested at all.
The story is that for the first time since auto-enrolment began, we are having a proper debate about where the money we, our employers and the taxman invests in our pension pots – goes.
A debate that has to happen
And now we have further discussions around how we invest the Pension Protection fund
The Telegraph has published an important piece calling for better deployment of the money that sits inside pensions, as DC pots and as the source of money to pay defined benefit pensions.
You can read Simon Foy’s article in the Telegraph here
No reason for the Lord Mayor not to express his opinion.
Nicholas Lyons has done us all a favor by inciting this debate. People may dislike his being a City big-wig , as they might dislike Andy Briggs, Nigel Wilson and Peter Harrison. But that doesn’t make them and their ideas wrong.
Nor are Norma Cohen, Chris Giles, Romi Savova , Amanda Blanc, Patrick Hosking and Simon Nixon wrong for taking an opposite view.
Both sides are right for having this conversation and I happen to be on the side of Lyons on this one. That doesn’t make me Labour or Tory – or both! It is simply me, having an opinion, which we can count our lucky stars – we are allowed to have!
Yesterday was a good day for big pension schemes. USS finally gave back its pre 2022 benefit promise to its members, the Government are rumored to be putting the PPF to work and yesterday Mark Fawcett and Elizabeth Fernando celebrated Nest getting £30bn under management.
New CIO Fernando comes from the USS and has a history investing pension assets for growth. It’s clear from her tweet that she’s going to be working to improve returns for savers (like me) who want my money to be put to work in Britain.
Milestones like £30bn don’t come round often
The Nest pension scheme is Britain’s largest DC plan – almost £10bn bigger than any other master trust. It looks after the auto-enrolment of over 1m employers and has over 10m members.
Without it, auto-enrolment would almost certainly have run into grave trouble with private sector providers pulling up the drawbridge on the long tail of employers that staged after 2016
auto-enrolment traffic
Nest and this blog have not always been friends.
Nest’s investment has had its hiccups, its rather silly nursery plan where young new joiners are inducted into a section of the default where they were “protected” from harm by investing in low risk assets like bonds (ahem!). Where woke behavioral nonsense has occurred – I’ve called it out. Where Nest has been less than frank about what they/we are paying for asset management – this blog and Chris Sier has called them out!
There have even been times when Nest and this blog have come to blows. Most famously when two of Nest’s PR team started a private discussion on the lack of merit of the blog in the comments section of the blog -oops!
We have come through all of this and even survived a threat of legal action after I said something rude about Mark Fawcett (the then CIO).
And there is so much more that Nest needs to do than just build up our pots. Many Nest savers, me included, are over 50 and looking at their pension pot with the interest you get when you think “what could I spend that on?”
Of course, a pot is supposed to buy a pension and that is Nest’s next big challenge.
Because for now, Nest only offers the most rudimentary of drawdown offerings, has abandoned its annuity carousel and has shown no signs of using its massive size to provide mortality pooling for those who want to make sure their money lasts as long as they do.
Nest a great work in process
Nest has got some work to do on the IT side, restoring a plan which was derailed by an abortive hook up with ATOS.
It has to repay a massive loan from the DWP, which will take another 15 years, based on these projections
And Nest will undoubtedly come under huge political pressure to seed the initiatives that Nicholas Lyons and others are cooking up, to get Britain working better.
But it is a stable ship. Helen Dean took over from Tim Jones but Nest has only ever had the two CEOs since it started out as PADA in 2008. It has similar continuity in its investment and operational divisions and its trustees too show stickability.
It has been notably free of scandals, has not had an IT hack and though clunky, it provides a clean interface with employers which works. I have complained over the years of Nest not working better with the industry but in certain areas, such as Nest Insight, it has provided thought leadership which has helped me and many others better understand the behavior of savers.
The achievement of gathering £30bn of assets , deserves rather more than the publicity it isn’t getting! Well done Nest – here’s to the next £30bn.
Mark Fawcett and Elizabeth Fernando (Nest’s former and current CIOs)
USS benefits to be restored ‘in full’, says UUK and UCU https://t.co/3Vc7kXGRc3 via @profpensions so ends a bizarre episode where theory overtook common sense , causing needless damage to thousands of young people’s education.
I am very pleased that the UCU has won its fight and with the University employers , agreed for member’s benefits to be restored to pre-2022 levels. UCU , the union fighting for members of USS is right to feel proud of its determined position. Here is how it announced yesterday’s news.
University pension benefits on track to be restored ‘in full’, employers and union confirm
The package of devastating pension cuts imposed on university staff last year are on track to be revoked, with benefits restored ‘in full’, said employers and UCU.
UCU has said the comprehensive restoration of stolen benefits will see UCU members recognised as ‘history makers’ of the trade union movement.
In April 2022, employers imposed a series of pension cuts which would see the average scheme member lose 35% from their guaranteed future retirement income. Employers, led by Universities UK (UUK), did this by dramatically reducing the rate at which staff would accrue benefits and the salary threshold at which defined benefits would build up. UUK also brought in an inflation protection cap, meaning, from the next valuation, benefits would only be protected against inflation up to 2.5%.
However, in a new joint statement, UUK and UCU confirmed that, pending a successful 2023 valuation and the green light from ordinary scheme members, the accrual rate and salary threshold at which defined benefits build up will both be returned to pre-cut levels. The statement also confirmed that the pre-April 2022 inflation protection will continue unchanged, rather than being reduced at the next valuation, as originally intended.
The statement also included an important commitment to explore how future benefits might be improved to take into account the benefits that have been lost since April 2022, when the cuts came in.
With the changes reversed, UCU says an average scheme member, aged 37, could see hundreds of thousands of pounds returned to their retirement fund over the course of their career.
The joint statement comes after the USS trustee reported a further growth in its surplus to £7.6bn with the cost of restoring benefits in full falling to 21.8%.
The joint statement from UUK and UCU confirmed, subject to the 2023 valuation, that:
the pension accrual rate will return to 1/75 (up from 1/85)
the salary threshold at which defined benefits build up will return to its pre-April 2022 level
the inflation protection that existed prior to April 2022 will continue unchanged
exploring options to improve benefits to a level which makes up for benefits lost since April 2022
UCU general secretary Jo Grady said:
‘When university staff demanded their pensions back, they were scoffed at, ridiculed and told to ‘move on’. But, today, they have taken another big step towards seeing their retirement benefits restored, in full. This would be an incredible victory which will see our members become history makers of the trade union movement.
‘Ever since this dispute began, university staff have backed their union and made huge sacrifices, and, in doing so, have brought the dispute close to a conclusion. But, be under no illusions, we will not take our eye off the ball for one moment and ensure every penny is returned to our members’ pensions.’
In a move that gets the thumbs up from this blogger, the FT report the Treasury eying up the Pension Protection Fund to take on assets and liabilities of smaller and weaker DB pensions , stuck at the back of the queue for buy-out.
The FT correctly pick up on the three important proposals
The PPF is a sleeping giant , it needs to be woken up and put to work
It needs to get proactive – offering itself to the market as a competitor to insurers and superfunds. That means a change in the benefits it pays
It can become part of the Treasury and DWP’s plan to reflate the British economy with money currently locked in unproductive investment strategies.
The source of this information is clearly sanctioned to leak
The proposals, still at an early stage, would require primary legislation, said one government insider.
Why do I give this the thumbs up?
Confidence in Government run funded pensions
The Government has shown, through its management of the PPF and Nest that it can run large pension schemes at an arms length. Both have shown that they can provide good outcomes and have attracted praise for innovative approaches to investment and administration. Neither have stifled innovation elsewhere.
The PPF is less than half the size of Britain’s largest pension (USS) but is scalable. It needs a rebrand and legislation to change its investment strategy and its benefit promise. It cannot offer employers the option to swap the existing promise for the current substantial haircut. Any business taken on voluntarily, should provide equivalent benefits. There will be plenty of argument about “equivalence” but I believe a robust equation can be reached as it has elsewhere.
There is market demand
The current capacity from insurers to buy-out liabilities and assets of the DB market is estimated at about £60bn this year, this is a tiny fraction of the £1.5bn invested.
If – as intimated by TPR CEO Nausicaa Delfas, the door is opened to Superfunds to increase that capacity, there is still a capacity gap which means that many UK corporates are left holding the DB baby, while wanting to focus on more productive things. There is scope for insurers – superfunds, DB master trust and a revamped PPF, to work together. But it will need the change of mindset that Delfas referred to in her speech earlier in the week.
More of the £1.5 trillion in DB needs to be reinvested in productive capital
By “productive” I mean “results driven”. The aim of “productive capital” is to produce a more sustainable , environmentally friendly and source of growth for the UK. Continued investment in Government and Corporate debt is not the best use of the tax-incentivized billions locked up in DB occupational pensions.
But there is zero incentive for trustees to invest for the future when the hope-for future is to move to the front of the queue to be bought out by an insurers.
If instead of swapping the scheme’s assets for annuities, trustees had the option of transferring to what (in all but name) is an open ended pension scheme, then we might see more ambition from trustees.
I can see a virtuous circle where the ambition of many DB schemes is to embrace growth rather than avoid risk.
This is of course entirely at odds with the Pension Regulator’s DB funding code which could be happily retired – were this proposal to move forward.
What will this do for DC?
Many of the employers who fund the deficit plans demanded of them by trustees and TPR, have pension costs in their budgets that could be redeployed to run either DC or even CDC schemes for those staff not fortunate enough to have been bought out.
The Government’s thinking is clearly to release corporates to be more productive in their own right, but if DC and CDC arrangements that they run or participate in , are themselves investing in productive capital, the attitude of boardrooms towards pensions will change.
A fund set up by Government or the private sector to give the PPF access to the returns of productive capital, could of course be offered to DC savers too.
The big picture mind shift that Government wants
This is the big picture stuff, but if we ever want to get a workplace pension culture where the aspiration is to provide pensions for staff, then we need a much higher level of ambition from employers than is currently the case.
The employer who can see the UK pension system funding long term investment that it can participate in, is not going to be demanding that pension schemes provide services at such low a cost, that it can only afford to invest in large cap passive equities, bonds and gilts.
“Value” to an employer takes on a new meaning, in pension terms, where the pension scheme becomes valuable to the shareholder and executive.
Lest we forget
In 2019, I went to 10 Downing Street and sat in a meeting where Derek Benstead and Hilary Salt called on the PPF to become a better invested, more proactive force for good.
They were right then and we shouldn’t forget that throughout the dark years since the lockdown of DB schemes, they have always proposed what is finally being considered.
Ok that’s the ad 0ver. But in the spirit of the Lang Cat, I thought some irreverent and irrelevant detail on how the Lang Cat got it’s name would go down well, so I pinched this off the Lang Cat website
Whatever the talented Mr Barrett comes up with is likely to be every bit as entertaining.
HOW THE LANG CAT GOT ITS NAME
They say you should never meet your heroes, but when you get the chance to wander up to a slightly ginger Fifer in a red cap who wrote the song after which your company is named, you should probably do that.
And that’s what I did on Wednesday night of this week when I went to see James Yorkston playing at the Pleasance in Edinburgh with The Pictish Trail and Seamus Fogarty. It was a very low-key but very funny and musically ace night, drink was taken and it was all good.
At the interval I huckled James Yorkston and told him that I’d named my company after his song ‘A Lang Cat’ which is off a record called Lang Cat, Crooked Cat, Spider Cat. I think it’s out of print now but you can find out more about it here.
Anyway, when I was setting up the name kept popping into my head and wouldn’t go away, so I gave into it and that’s why the lang cat is called what it is. Also, it stops us sounding like a team name from the Apprentice or whatever.
James was a gentleman and managed to look not too crestfallen when I told him what business we were in. Sorry it’s not Fairtrade humanitarian stuff, James. He also told me the story behind the title of the record.
When he was in Spain one time, he saw three cats attacking a snake – one at the head, one at the tail and one at the middle. One was crooked – sort of bent out of shape I guess, one was (I dunno) spidery, and one was ‘lang’ which doesn’t just mean long but can mean skinny, like ‘a big long drink of water’.
There is no video of this Lang Cat song but cats do appear in the accompanying video of the Border Song – and they are Lang
