Robin Ellison – I'm going to be famous, I don't need maths

Videos and stats

Pensions and film are unlikely bedfellows, but there are a couple of recent offerings. One stars [reality TV celebrity] Gemma Collins. Wikipedia notes: "She left school at the age of 16 with a U in GCSE Maths. Reflecting on her time at school, Collins said ‘I remember sitting in the exam room for my maths GCSE and thinking, I'm going to be famous, I don't need maths.'") Her PensionAttention video is here (https://www.youtube.com/watch?v=u1VOLzZ0Y4U) with other videos on the Pension Attention website. It is hard to tell whether public behaviour will change much as a consequence of Ms Collins' endeavours.

Meanwhile, another video short makes a different point with less drama. It suggests that on average we only draw a pension for around 8 years, which is curious if true.

It doesn't quite tie up with some figures recently published by the ONS which encouragingly conclude that while In 1977, only around one-fifth (21%) of retired households had an annual disposable income of over £10,000 (after accounting for inflation and household composition) but by financial year ending 2016, this had increased to 96% of retired households.

Over half of the increase in the income of retired households between 1977 and 2016 can be attributed to increased private pension income alone, which has increased nearly sevenfold over the period. And that's without videos (mostly).

Pensions wars

The recently released DB funding code is of course just that – a code. So, it is mildly influential but although it pays lip service to the previous government's expectations that pension funds would fund UK infrastructure is rather quiet on the conflict between the new government's aspirations for pension funds, and The Pensions Regulator's (TPR's) aversion to risk. And, of course, a code is not law, much as TPR thinks it is. One day HM Treasury will have TPR in for tea and biscuits and explain to them the facts of life and pension fund investments. To have a conflict of investment policy affecting a trillionish of UK money is not a happy situation and the hope from the industry is that common sense will prevail and TPR will rethink in the light of the new government's aims. Meanwhile foreign pension funds (and UK funds) have lost money on water investments, and are continuing (from their point of view) to invest, not in their domestic infrastructure, but in UK infrastructure. All very odd, and the investment consultancy industry should file the code under ‘interesting' and try and invest for growth as the new government wants.

Liabilities

There a different pensions war proceeding in the United States. The Department of Labor (DOL), the US's TPR and Financial Conduct Authority (FCA) combined, has been trying for some years to extend what they call fiduciary liability to those involved with what we would call personal pensions. The costs of that for both plan members and the industry have been impressively articulated in the inevitable US litigation, which is being conducted in Texas, the base of many of the trade bodies. As a temporary measure the court has suspended the DoL requirements whilst directing a full trial, but hinting very hard that the DoL are likely to lose. The case for more gentle regulation has been articulated in an impressive briefing by the American Council of Life Insurers. It's long, but suitably amended could serve as a briefing by our own Association of British Insurers when it talks to the FCA.

Happy anniversary

This month is the fiftieth anniversary of ERISA (Employee Retirement Income Security Act), the US equivalent of our Pensions Act. It has undergone some amendments over the half-century, but it remains a single piece of legislation covering the governance of US pension plans. It is remarkable how less incontinent the US legislature is in relation to pensions than we are. Maybe we have something to learn; the US, with all its legal faults, is managing to live without The Pensions Acts 1995, 2004, 2007, 2008, 2011, 2014; the Pension Schemes Act 1993, 2015, 2017, 2021; the Welfare Reform and Pensions Act 1999; and innumerable social security acts, statutory instruments  and other stuff. It's a mystery how the US pension system survives. Maybe it's a lesson the Department for Work and Pensions et al may take some time to think about, given that the new administration is committed to deregulation.

FCA: not so quick and much more expensive

Tom Kalaris was the head of wealth at Barclays during the financial crisis of 2007/2008. The SFO prosecuted him in relation to possibly illegal capital injections into Barclays at the time and he was cleared on all charges in 2020. The bill for the SFO was £32m. Two years later the FCA decided to ban him despite his expensive court acquittal, and he has just lost an appeal against the ban. This is not the place to discuss whether the tribunal decision was right or not – but it is fair to note simply that it has taken 17 years after the event for the FCA to exercise its powers. It is right that an accused person is entitled to due process; but it is odd that it takes nearly two decades – and anyway Mr Kalaris is still working in his new company although not allowed to be a director. What was the point of all this pointless delay and expense? Presumably it counts as a triumph for the regulator, but it is hardly protection if needed for the public (Why is Barclays still in the dock?, The Times, 28 August 2024). Meanwhile Barclays continues to debank people for not completing its AML forms in time, and has no appeal process. That can't be good for UK plc. (See: Saranac Partners Limited v The Financial Conduct Authority).

It is not as though the FCA is lacking resource. The FCA's running costs rose (again) last year, by £92m. The operating costs for 2023/24 were £761.7m, up from £669.7m the previous year. Meanwhile, it reported a £44.8m deficit (2022/23: £52.1m deficit), with reserves dipping from £68.2m to £23.4m as it upgraded its IT (expected to cost £180 next year). But it was staffing that cost the most; as of 31 March, the FCA and Payment Systems Regulator (PSR) had a total permanent staff headcount of 5,257, an increase of 665 on 2022/23. And in August, the regulator confirmed plans to add an additional 100 staff to its expanded Leeds office.

The regulator has prioritised £180m in funding for the upcoming financial year to further invest in data and technology which seems quite a lot. Maybe it could get Mr Kalaris to advise it on its wealth management.

HMRC makes a mistake

HMRC is struggling to manage on a day-to-day basis. In the spring quarter it returned £56M overpaid pensions taxation in what it calls ‘pensions flexibility' aka Pensions Freedoms (see: HMRC Pensions Newsletter 161). That's a run-rate of £200m per annum, but we don't know how delayed the payments were, and what rate of interest they bore (or what investments losses were incurred by taxpayers). What's interesting from the figures is that transfers overseas doubled in 2023. And to be up to 161 newsletters suggests too much activity in pensions taxation.

Risk: smoking, stairs and chairs

The government is to make it difficult for people to buy cigarettes and for those who can smoke, to smoke outdoors in pubs. It is true that smoking still kills a lot of us every year, but as Henry Dimbleby pointed out a year ago, so is food. Obesity is actually the biggest killer. A caring government needs to introduce food rationing, and for us in the pensions world, while we are all supposed to create risk registers for our schemes, few of them mention the issue of eating. It might be a useful thing to do, especially as in the past we all missed the big ones such as pandemic and war.  In the meantime a company called Dino Decking, which does what it says on the deck, looked at the NHS Report on Hospital Admitted Patient Care Activity, which indicated that there were around 40,000 falls on stairs and steps inside the home, and 11,500 of us were admitted to hospital following falling off chairs. And around 100,000 of all ages had slipped in the house. It is clear that all people who live in a home should complete risk reports perhaps on an annual basis, we need to establish a House Regulator, and it should be illegal (with a meaningful fine as penalty) for  anyone over 70 to live in a  dwelling with stairs. As the once-famous Matt Hancock reminded us: we need to protect the NHS.

Pensions and history

We are about to get yet another study on pensions reform; there has never been a shortage of these studies. The City University wrote a blockbuster in 1984 (Pensions The problems of today and tomorrow) which presciently anticipated many of the problems of today. But few of the innumerable reports since then remarked on the necessary longevity of pension systems (if they survive). Getrude Janeway died in 2003 aged 93. In 1927, when she was 18, she had married 81 year old John Janeway, who had joined the army in 1864. She received a $70 pension cheque every two months from the US government for veterans benefits until she died.  What is it about elderly men that makes them so very attractive to young girls; Alberta Martin, for example, died at the age of 97 in 2007. She had married in 1927 when she was 27 to William Jasper Martin when he was 80 and who had joined the army in 1864. He died in 1932 and her pension when she died around 70 years later was $50 a month.

Robin Ellison is, among many other things, the chairman of the College of Lawmakers, a retired pensions lawyer, a visiting professor in pensions law and economics at Bayes Business School, City, University of London and chair of several pension funds