More whingeing from the wealthy about pension taxes

Posted on September 25, 2026 by henry tapper

Alan Livsey (the FT’s pension correspondent) makes a rare excursion into pensions. It is to make a moan about how Labour have frightened the rich to withdraw their tax-free cash before each budget. This continues as people realise this is the last budget before pensions suffer a “death tax” – at least if they’re hoarded to pay Inheritance Tax.

I’m sorry if I sound a moaner, but there really is a lot of good going on in pensions right now, people have their pots at all time highs, annuity rates are great to buy and CDC is about to become available to employers who want to pay deferred pay and not pots.

So read the following from today’s FT and remember there is another side to what has happened since this Labour Government took power, Most of it is good news!

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Elitist games – is this what we pay the pension minister to play?

Posted on September 25, 2026 by henry tapper

This sounds good fun – if only for the elite! The great and good brought together by yet another global organisation to raise the profile of DC. You can read all about the purpose of the event and the kind of organisations behind it here.

We used to have the Gleneagles Conference that the elite aspired to get an invite to , but the thirst for that kind of thing outlives any beano. So here goes Gleneagles II.

This comes out of Washington, not everything in Washington is to our taste and what it or the Aspen institute mean to anyone in Britain is beyond me.

It’s good to see top thinkers talking things out between themselves and not so good to have the event publicised without an attempt to tell us what progress had been made.

A lot of folk would like to talk with and listen to senior figures in the pensions industry, including our pensions minister.

I am sure that I am not the only person wondering what an elite, hosted by the CEO of People’s Pension are doing to help the 20 million pension savers!

If the discussions that were had at this conference could be shared, even anonymised to meet the Chatham House Rule, then some of the subjects alluded to by Patrick could mean something to those of us not included.

As it is , we are left out of any of the “visions” reserved for the great and good – whoever they currently are.

I hope that our Labour Pension Minister will remember he stands for the people not the pension elite; he should be more careful to be advertised as a trophy.

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Most people want and need a pension – the IFOA and BIT tell us

Posted on September 25, 2026 by henry tapper

I’ve recently asked that pension people elevate their think to “consumer level”

To most people, the pension they’re thinking is the income that’s available when they think they’ll need it or the date they can retire because their income is sufficient. It is not more complicated than that , no matter how complicated we make our apps to answer questions that most people do not ask.

Once the simple question that people asked is answered, there is a next steps question which is how to get paid a pension, an income that is a wage in retirement. The good people of the institute of actuaries and BIT have done some thinking about this and have worked out there are good ways and bad ways to do this.

So what is being said? BIT are behavioural scientists and IFOA are pension experts, together they set out to use a deep understanding of human behaviour to design interventions that solve your real-world problems. BIT claims to

work closely with clients like the IFOA, and bring together everything we know from behavioural science with human-centred design and co-design methods.

The IFOA sent me the report (thanks Glyn Bradley) because they know this blog’s strapline is “turning pots into pensions”.

What do they find works (and doesn’t) ?

The central finding is that any design element requiring active member engagement in later life is at serious risk of not being acted upon.

  • Drawdown assumes sustained pension engagement throughout retirement, including at ages when cognitive decline is prevalent.
  • Annuity assumes irreversible acceptance of the package, which seeks to address concerns regarding underestimating life expectancy
  • Flex and fix would usually assume that a second decision, converting residual savings to secured income, actually gets made.
  • Retirement collective defined contribution relies on trust in a mechanism that is new not just to members but largely to the UK industry. That trust must survive income cuts, and the design’s asymmetry makes this demanding: a cut is experienced as a concrete, attributable loss, while the benefit, protection against outliving one’s savings, is never experienced as an event and guards against a risk members already underestimate.

I think the conclusion is that there has to be a better way for pension experts to help pension nit-wits than telling us nit-wits how to do it for themselves.

I quite agree but what does this mean in practice? Well quite obviously behaviourally is that what works is being nudged into defaults. That’s the story of the success of auto-enrolment. Offering no retirement guidance by way of a nudge down a pathway which is the only way if you don’t opt-out.

What are the pathways that BIT and the pension actuaries conclude as “good”

The two designs that can deliver longevity protection without betting on an active member decision in later life are flex and fix, provided the fix is automated or defaulted rather than optional, and retirement collective defined contribution, provided member comprehension and trust can be established and maintained.

The conclusion of the report makes sense to me – less than two months from my 65th birthday.

The report recommends that defaults should be designed so that the do-nothing path leads to a defensible outcome at every age.

Communications should be framed around income needs rather than pot size, and tested rather than assumed to work.

The lump sum decision should be tested as part of income planning. Schemes should adopt minimum viable segmentation using simple proxies.

Government and regulators should attend to the trustee’s decision environment as deliberately as to the member’s.

Without safe harbours for well-evidenced defaults, the trustee dilemma will resolve itself by default: towards flexibility, the option that feels safest to trustees but that unengaged members cannot use.

It is that final paragraph that should be hammered as a poster on the door of every trustee boardroom. If we do not make it plain to people what is going to happen to their pot, they will have the flexibility that most people do not want– I fear it, so do my Friends who I talk to – who are my age and who have worked all their lives..

The tax free cash will do me, the income is what I get paid, my wage in retirement and that can only come from collective pensions or from drawdown and eventually an annuity.

That is where DC workplace pensions are heading.   People will abandon the “dream freedom” offered; – they want instead deferred pay for the years that they have taken a pay cut

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Pension people- lets elevate our thinking to ‘consumer level’

Posted on September 25, 2026 by henry tapper

There is a lot of concern at Pensions UK that people aren’t paying much attention to their pension. This is hardly surprising because people aren’t being spoken to about their pension but about all the things that we think should matter to them.

Thanks to Martin Richmond of Professional Pensions for reminding us of what we all do which is prioritise health and fitness apps over apps that tell us how much we have saved towards retirement.

We’re really not that interested about how individual pots are doing , what we want to know is what income we are looking forward to. The state tells us what we are getting at retirement. This is what my pension dashboard tells me today

This is what the pensions dashboard aspires to and it’s getting there , Robert Cochran – the voice of Scottish Widows (Lloyds Bank) gets this from his Pension Dashboard (he’s signed up to be a tester so gets what the test-site tells him

I hate the way “around” is used of a number as granular as £143,859.32 but otherwise I would be rather happy to have this forecast, Robert will be paid in retirement more than I have ever been paid!

But Robert  explains on linked in that he is being given the wrong number and that he’ll be paid a lot less than this but he can work this out with his financially attuned brain.

He’s getting the wrong future income because one feed from a pension scheme is showing his cash in value as a pension and another showing the pension he’d get if he carried on paying (even though he’s left that workplace).

In short he’s  being confused by what’s a pot and what’s a pension. Richard Smith ticks his fellow expert off for not giving the dashboard the chance to get its act together but for once I can’t side with Richard. If Robert’s experience is replicated millions or even thousands of times then we will all find going on the one app that really matters (the pension dashboard) will be disastrous for our confidence in retiring.

We really don’t need much to get to what Richard Smith calls “consumer level”. We need what the pensions dashboard aims to give us, an income on a certain date (explained by the full pensions timeline- if you’re interested).

We then need a lot of collaboration to allow people , rather than to consolidate to one provider , to do the best with what they’ve got, letting collaboration by the providers give them the chance to get guided retirement income.

The consumer (that’s you and me) wants to know two things- one that the information that’s arrived on the digital dashboard is approximate to the income they can expect (Robert’s wanted) and that there’s a way to convert pots into pension that makes sense to consumers when they’re ready to swap work for retirement. Here the dashboard is very right, it should answer the big question

“what can I retire on if I were retiring now and what if I held on to the date they are quoting to me”

My concern is the concern of the Pensions UK.  People really aren’t in to checking what the day to day pot value of a pensions saving plan has done in the past few days.

They want to see their income from their savings as a single number and then at a certain time and then work out how retirement might arrive for them. It really is bad news if the data on two of the pots that Robert has are misquoting pension but it’s good that someone’s trying to project his retirement income. It is something that people will want to see, because it is as simple as the state pension that they get (as I illustrate at the top of the blog).

How to turn all these pots into the promised income, or something approaching the granular number being quoted, is another matter, the problem that a new report from the actuaries, tries to address.

We ask people to pay our pensions some attention but until we have our act sorted out with a reliable pension dashboard , we don’t want to know. We promote pensions in a way that’s distinctly archaic.

See what I mean! Poor Robert and archaic promotion of pensions.

Until we know how our pots can pay a pension through guided retirement. We must learn how to  turn pots to pension or hire an adviser to do it for us and that was really not what we signed up to. We signed up to the simplicity of the state pension.

My next blog will look at this stage two with the Institute of Actuaries. They’re trying to get as all we pension people should, they have the same  realisation.  Pensions UK and Robert Cochran are shocked to discover we’ve  a long way to go till we elevate our thinking to consumer level.

To state the bleeding obvious, we should be offering consumers a better retirement income  forecast than we do today.

 

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Make pensions easier for the self-employed with accessible, but not mandatory, saving (thanks SPP and Prospect))

Posted on September 24, 2026 by henry tapper

There are two schools of thought on the self-employed, the first is expressed by the Society of Pension Professionals which is to include them in workplace pensions.

The second is from Steve Thomas of Prospect Union , which asks for them to be left alone. I have published Steve’s thoughts, inspired no doubt by the thinking of Prospect’s Pension team led by Neil Walsh. They are a force to be reckoned with and they say that there should be no requirement for the self-employed to be in workplace pensions.

Here is Corporate Adviser’s explanation of the SPP’s position

SPP: Millions of self-employed missing out on pensions

You can read the SPP’s report here

But the gist of their position is stated in the summary and assumes that the self-employed are the same as any other folk and need auto-enrolment

This paper seeks to move that conversation beyond diagnosis towards practical solutions. If AE was the defining pensions reform of the last generation, ensuring it does not leave behind the millions who work for themselves should be one of the defining challenges of the next.

Nest has had a workplace pension which is open to any self-employed worker in the UK to join and contribute to. If you don’t believe me, this link takes you to the joining details.

Simple and an excellent entry to a pension, Nest’s self-employed “sign up” option is under-promoted and under used. It needs to be improved for self-employed saving but this could be done.

Martin Lewis, who advertises self-employed personal pensions as efficient and effective does not seem to know Nest’s option exists.

The trouble is not that the solution isn’t there. Reading the conclusion that the SPP comes up with tells me that technology is there to make Nest the self-employed default position pretty well immediately.

The problem is that the self-employed are not worried about under-saving, they are (for the most part) wanting to get on with it , on their own.

I think we can make pensions like Nest more accessible and more popular and I hope that the SPP’s report will be a useful spur for the Pensions Commission to help. But to suppose that some kind of mandation is required (even only a nudge) is too much for me as it is for Prospect.

 

 

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De-risking a DC pot with “lifestyle” has no place as default for those still saving.

Posted on September 24, 2026 by henry tapper

There was a time when DC pensions simply built up capital in equities and offered a cliff edge into bond-based annuities. It was a time when everyone had to buy an annuity and when equities had their last great run. When things turned sour for annuities around the millennium, the actuarial concept of matching became popular.

Scottish Life (to my memory) were the first provider to start moving people from equities to defensive assets on the basis that it got people our of dangerously volatile equities and into gilt funds that matched the cost of buying an annuity.  There was sense here, it was what was happening in DB which were switching from accumulation funds to funds actually paying pensions.

But since then, much has changed. The mania in DB schemes to de-risk everything in favour of buy-out by insurers has subsided. In DC, more fundamentally, the requirement to buy an annity was relaxed first with large DC pots and in 2014 for everyone.

But the de-risking mania that led to every DC scheme being “lifestyled” has not been rolled back. Though annuities are no longer a default, lifestyling  de-risking most definitely is. It is still a feature of most master trusts , sole sponsor occupational DC plans and group personal plans.

In this statement of angst from academic Stephen Thomas, we get the views of someone coming to DC pensions without the history of DC entrenched in his psyche.

Stephen Thomas is a professional thinker. He has no reason to hold back and he doesn’t. Glidepaths and de-risking have no place (for him) for people in their fifties and sixties. Here he is – quoted by Christopher Marchant in Corporate Adviser.

Setting a glide path in retirement is ‘completely useless’ and equities investments should be held in a portfolio for as long as possible, Stephen Thomas, a professor of finance at Bayes Business School, has claimed.

Thomas also proposed a sequence risk ratio which divides the average or expected perfect withdrawal rate by the standard deviation of withdrawal rates across return sequences, providing information beyond the Sharpe ratio in retirement.

“Glide path investing is completely useless, and you should stay in equities to the very end,” says Thomas.

In supporting his case, Thomas pointed to fallout from the 2008 financial crash in the US. According to the SEC, 2010 target date funds lost almost 25 per cent on average in 2008, while individual funds’ losses ranged from roughly 4 per cent to 41 per cent.

At the same event, hosted by investment platform Mobius, Alison Fisher, senior director at Willis Towers Watson, argued that retirement collective defined contribution could materially improved returns for scheme members.

“There are three big problems retirement CDC helps to solve,” says Fisher.

There is of course a third way that makes sense of both Stephen’s and Alison’s comments. You cannot get a guided retirement fund to stay in equities (as it will flex and fix into an annuity (albeit in much later years). You can’t get a retirement CDC fund to require “pension” funds to stop de-risking. The third way is that there is but one from the point at which you enter the pension plan till the day you die and that fund can have an infinite horizon where young people replace old people who die.

Such a fund is what Stephen Thomas wants and perhaps he wants social insurance which avoids lifestyling but managers longevity through collective pensions. If so we are on the same page. I was not in the audience when he and Alison were talking but I was there in spirit. I hope that WTW will find a way to get as close to UMES CDC as R-CDC allows and I hope that people can invest in equities till death by using a collective pension currently known as  “workplace” or “whole of life”,

Neither Stephen or Alison sound keen on de-risking and neither am I. We will inevitably have some bonds in CDC to de-risk the worst case where underperforming CDC can neither fix the fault or pass the scheme to someone who can. In such cases the need to swap CDC pensions for annuities and that is the last stop. That is the only reason for a collective pension to hold any pensions.

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Our council tax may pay more into other people’s pensions than we do our own!

Posted on September 24, 2026 by henry tapper

For many in the private sector our council tac is huge and because of low income, the 4% of band earnings paid through auto-enrolment may be less than the proportion of council tax that is paid into the LGPS fund.

Tom McPhail is quite right to point out that Council Tax is artificially high to pay on average a 16% employer’s contribution to support the Local Government Pension.

People struggle to pay household bills while LGPS runs an immense surplus. It is not as if the LGPS members run the risk of having pensions clipped if Councils go bus, the pensions are guaranteed to be paid in full. The tax-payer is the insurer of last resort.

There are many proposals in play to spend the healthy surplus to reflate parts of our society which have no money but the simplest way to do it is to cut the cost of pensions to participating employers and let them do their jobs – which have social importance to Britain.

Here’s Tom. You can read the original in the Times on this link.

Illustration of Tom McPhail in glasses and a white shirt on a background with speech bubbles and wavy lines.

This pensions windfall should be driving councils to cut taxes

It’s time that local authority pensions became less generous — especially when we are the ones footing the bill

Tom McPhail

The local government pension schemes are the best, and also the worst, of the UK’s public sector pension schemes. They are helping to perpetrate an injustice on council tax payers up and down the country.

To their credit, they are at least funded (unlike most public sector schemes), holding a pool of about £400 billion to pay out members’ benefits. So they are not racking up unfunded promises that the taxpayers of the future will have to satisfy. They’re the nearest thing we have to a sovereign wealth fund and they do make investment decisions that pay some regard to their impact on local communities and their economic needs.

However, they are funded from council tax, which rises inexorably every year despite the fact that many local authority pension schemes have a healthy surplus of cash to meet their future liabilities. The schemes cover about 6.9 million members, of whom 2.2 million are active employees.

There is not one single scheme but many regional variations in funding levels and contribution rates. Different schemes have pooled their investments into six mega-funds, which manage the assets for all the local authority employers around the country.

Most of these schemes are in surplus, typically with assets of 25 per cent or more in excess of what they need to meet their liabilities. This is a sharp turnaround compared with a few years ago. As interest rates have risen, particularly since 2022 and the infamous mini-budget, so the value of future liabilities has dropped. That means most of these schemes now have more than enough money to meet their liabilities.

Despite the surpluses, many local authorities continue to pay generous contributions to their employees’ schemes. The cost of these contributions comes from a local authority’s budget, funded in no small part by the council taxes paid by their residents. In response to the improved funding position, councils have been cutting their payments into the pension schemes, albeit from a high base.

Over the past few years councils have dropped their employer pension contributions from an average of 21.3 per cent of salaries to 16.6 per cent. Meanwhile, council tax continues to rise.

According to the last council tax review in March, 274 out of 384 authorities increased their council tax by the maximum (which for many means 4.99 per cent) and the average increase for a Band D property was 4.9 per cent. As a ballpark figure, about 15 per cent of that council tax is going directly to fund these already well-funded pension schemes.

There’s something deeply unfair about local authorities increasing taxes on their residents while paying generous employer contributions to pension schemes that have healthy surpluses. For comparison, a resident of one of these authorities working for a private sector employer could expect a pension contribution of about 6 per cent of earnings. Someone on the auto-enrolment minimum would get 3 per cent of earnings between £6,240 and £50,270.

Defenders of the local government pension schemes argue that many local authority pensioners get relatively modest incomes. The average pensioner payment is £5,500 a year because many former employees worked part-time, only briefly or in relatively low-paid jobs.

But to put this in context, for someone earning £40,000 a year in a full-time private sector job getting the auto-enrolment minimum pension contribution, it would take 20 years to build up a pot big enough to pay a similar level of retirement income.

Council tax payers should not be funding guaranteed defined benefit pensions for public servants when they have no opportunity to build similar pensions for themselves. Local authorities should be using the present advantageous funding position of these schemes to close them off and switch to defined contribution schemes for future benefits.

If they were to pay contributions at the same average rate they are paying today — 16 per cent of salary — it would still be a far more generous proposition than anything available in the private sector. More importantly, it would close off the risk of contribution rates ever having to rise again in the future, something most council tax payers would welcome.

Tom McPhail is a pensions commentator with 40 years’ experience across the industry

But not DC for LGPS please Tom!

As Tom and every regular reader of this blog will expect, I am violently against the loss of a pension to the  British workers who are accruing an LGPS pension . There are not 6.9m as that figure includes those who are getting a pension paid to them and those who await an LGPS pension but are not working for an LGPS participating employer. But there are still a high proportion running into millions who are building up a pension quite effeciently.

It could be argued that LGPS could move to CDC in time and that may happen eventually, but it will only be when CDC has become settled in. We are talking decades and not years and will require union support that is still firmly behind DB.

The immediate task is to get a fairer balance between the council tax-payer and the council worker. As my partner reminds  me, she pays more into the LGPS through her council tax than she does into her personal pension. That is untenable when LGPS is overfunded.

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How do we afford long term care? Tuesday’s pre-budget coffee morning explores!

Posted on September 24, 2026 by henry tapper

 

Here is the video of Tom Scott at the Pension PlayPen on Tuesday (22nd Sept). It is a great discussion including interaction with Gareth Morgan, Padraig Floyd and Sir Steve Webb. Thanks to Steve Goddard for chairing and to Sophie Cooper and and Chris Bunford for managing the event.

I couldn’t make the live event and watched the video, I strongly recommend you do

As pension playpen people, we can’t ignore the question of long term care. It is a drain on our economy but it’s also a drain on our pensions.

At this week’s Pension PlayPen Coffee Morning, we’ve asked Tom Scott to talk with us about how Andy Burnham can afford to offer social care to those who may need it for the rest of their lives. The vast majority of these are pensioners.

This was not  the easiest subject to talk about but if anyone could, it was  the Pension PlayPen crew and Tom Scott.

 Long Term Care guru, Tom Scott  commented on:

  • how difficult it is for the state to fund care
  • the pros and cons of funding care
  • the difficulty of transferring tax money, essentially from young people to old people
  • the fact that ultimately you can’t take it with you when you go

If the state funds care for people with assets, essentially what it is doing is funding the inheritance of their beneficiaries who can often be quite wealthy in their own right.

 

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The market’s thoughts on taxes, budgets and pensions

Posted on September 23, 2026 by henry tapper

The FT speculate on the options John Healey is weighing up to balance up the give-aways in next month’s budget.

Pensions feature prominently in the FT’s guess on John Healy’s thinking on  budget taxes.

Pensions

There are several changes that Healey could make to tax reliefs on pensions — but they are politically hugely perilous.

One option is to restrict the tax relief available on pension contributions to the basic rate of income tax. This could raise as much as £22bn a year, according to a 2025 report by the IFS.

Healey could alternatively choose to reduce the “lump sum” of 25 per cent, up to a limit of £268,275, that individuals can take out of their pensions free of income tax. However, Sir Steve Webb, a former pensions minister and partner at pension consultants LCP, said: “It mucks up people’s retirement planning and it’s politically toxic.”

Any changes to pensions would come at a time of upheaval for a sector that prizes stability.

Reeves last year announced a Budget tax raid that will reduce the amount of money people can sacrifice from their pay cheques to put in pension pots without paying national insurance.

Another proposal that has garnered support among think-tanks is the removal of the so-called “triple lock”, under which the state pension increases in line with inflation, average earnings growth or 2.5 per cent. But Labour has committed to maintaining the triple lock until the end of this parliament.

 

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22,000 people who worked for bus company Stagecoach got a good deal

Posted on September 23, 2026 by henry tapper

I’m very pleased for Stagecoach, Aberdeen and the Stagecoach Group Pension for pulling off this deal. It makes life easier for the bus company, it benefits the asset manager with new assets and a pension scheme in surplus but most of all it means that 22,000 members of the scheme get more protection and a promise of a financially better retirement.

No one yet has had the guts to follow the Trustees of the Stagecoach DB pension plan and walk away from buy-out where the sponsor is fed up with a pension scheme it no longer wants.

Beyond the immediate benefits, the project shows how well-funded schemes can take alternative approaches to improve outcomes while maintaining financial stability.

The numbers speak for themselves. This was a job well done and PWC can pat themselves on their own back. The final shout out must go to the Trustees and  who orchestrated the deal.

Let’s hope that  Stagecoach has a new confidence in ensuring that a new group of staff who are not in the Stagecoach Group Scheme, get a wage for life that ensure that they can leave work with a wage for life.

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