Pensions and wandering hemlines - 2018 in review

It was Bill Bryson who said that “Language ……… is more fashion than science, and matters of usage …… tend to wander around like hemlines.”

Reviewing 2018 I was struck how the usage of many words I thought I understood appears to have changed.

In January we welcomed in the year with the original judgment in the BT Indexation case whereby the High Court confirmed that BT could not change the index it uses to calculate pension increases paid in the future to certain members of the BT Pension Scheme from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI). More widely, in my view, pensions need a bit of stability in terms of the hand at the tiller of policy and the Government came to power promising “strong and stable” governance. With that in mind, January also saw Esther McVey appointed Work and Pensions Secretary who then resigned in November. She replaced David Gauke and was replaced in turn by Amber Rudd. Three Work and Pensions Secretaries in 11 months is only “stable” if stable now means changeable, volatile, variable, unsettled, fluctuating, inconstant, inconsistent, irregular, fitful, unpredictable, unreliable, fickle, capricious, erratic, uncertain, wavering. Or similar. My colleague Mike Crowe has recently blogged on what trustees need to consider in relation to Brexit, but instability in Government is a factor over which trustees and sponsors have limited control.

In February action to ban cold-calling was promised by the Government in a bid to stem the flow of pension savers being lured into scams. In a joint paper, the Department for Work and Pensions (DWP) and HM Treasury actually confirmed the two bodies would “continue to work swiftly” to implement the much-called for ban. I thought, optimistically that might mean March, maybe April at a stretch. And still we wait. Whilst a ban on cold calling is not a panacea it does allow the messaging re scams to be simplified. If you get a cold call about your pension, hang up, it’s a scam!

In March Philip Hammond’s financial update was empty of any direct pensions impacts as the chancellor sought to trim down the fiscal statement. His first Spring Statement contained no pensions announcements. I couldn’t quite make my mind up if that represented “stability” or “negligence”. He could have “swiftly” announced the cold calling ban but, having advocated stability, perhaps that is me wanting to have my cake and eat it.

April was a bit quiet.

In May Simon John Colfer, who was trading under the false name Simon Davies, was sentenced to 12 months’ imprisonment, suspended for two years, after scamming tens of thousands of pounds from almost 800 victims in a complex pension fraud operation. Using a company named ‘Fortitude Trading’, Colfer took advantage of pension policyholders seeking transfer options and offered them a cash lump sum of up to 25% of the total transferred amount if they used his services. This is often referred to as Pension “Liberation”. Liberation is word that, in normal usage, tends to have positive connotations associated with achieving freedom and equality or protection from abuse or exploitation. So called Pension Liberation preys on vulnerable people, often desperate for money who are offered a short term solution, which often seems too good to be true. Because it is. So let’s stop talking about Pension Liberation and start talking about Pension Destruction, as that would be more reflective of what actually goes on here. Hopefully there will be many more successful prosecutions of pension scammers.

June saw Paul McGlone of Aon take up the presidency of the Society of Pension Professionals, replacing Dalriada’s own Hugh Nolan whose two year term ended on 31 May. June also saw the DWP launch its consultation on reforming trustees’ duties to consider environmental, social and governance (ESG) risks. Part of the consultation was around a suggestion that trustees prepare a separate ‘statement on member’s views’ setting out how they will take account of the views which, in their opinion, members hold, in relation to the matters covered in a schemes Statement of Investment Principles. The accompanying press release was fairly clear about what this would mean for pension schemes saying that “for the first time members would be able to hold their pension schemes to account over how social and environmental factors impact their investments.” That was a whole bunch of words that didn’t mean what I thought they did, apparently. Before the end of the week the DWP let it be known that it “slightly regretted” some of the wording in its press release because “people think we’re saying that they have to take account of peoples views”. Understandably this confused a lot people who could read and thought that was precisely what the DWP was saying, because of the words they used, and the order they used them in. And presumably that’s “slightly” meaning a lot, considerably, majorly, greatly, massively, or, as President Trump might say, bigly. The suggestion was dropped following the consultation exercise.

The pensions world dipped its toes in the surreal in July when it was reported by The Pensions Regulator (TPR) that scammers may be trying to steal savings from workers by falsely claiming to be calling from TPR. Apparently TPR had received reports of pension holders being cold-called by individuals posing as TPR staff offering workers a “free pension review”. To be clear “free pension review” is pretty much a synonym for “massive pension scam”. It may have been this development which prompted the Government to “swiftly” launch a further consultation on introducing the pension cold calling ban. We’re still waiting.

In August KGC Associates’ 9th administration report identified that there was still a significant gap between what larger schemes pay in unit cost per member compared to their smaller peers, with 200- and 500-member schemes paying on average £124.26 and £67.67 compared to 15,000- to 20,000-member schemes which pay £24.05 and £22.41 respectively. The survey suggested that the slow take-up of automation in managing data was a key cause and also that trustees who engaged more closely with their administrators also saw a benefit. Failing to address your schemes data issues is a false economy. It is not simply a matter of driving costs down but the evidence suggests an engaged trustee who, amongst other things, understands the value of clean data, automation and getting the best from your administrator and other advisers will ensure you receive value for your fee spend.

September saw Esther McVey, the then Work and Pensions Secretary backing the pensions industry to deliver the pensions dashboard after months of uncertainty surrounding the project. The uncertainty had been caused by reports in July that Esther McVey, the then Work and Pensions Secretary, might end the Government’s involvement in the pensions dashboard project. This uncertainty was further fueled when pensions minister Guy Opperman declined to deny the dashboard was being canned. When pressed on the point at the time by the Work and Pensions Select Committee Guy struggled to give a succinct answer, responding: “Clearly you can quote back to me things I’ve said in the past, and I fully accept things I’ve said in the past.” So, I guess it would be rude not to. For the record, speaking at the PLSA conference in October 2017, Guy said “Make no mistake, the dashboard will happen.” Which, I suspect, may have been the “things I’ve said in the past” that he was thinking of. But as noted Esther subsequently clarified that Guy meant what he said in October and not what either of them possibly said, or struggled not to say, in July. I trust that’s clear?

Guy was back in the news in October launching a simpler benefits statement. This is a welcome development. Years ago I coined the term Copeland’s Law to express my view that the likelihood of a piece of pension correspondence actually being read by a member is in inverse proportion to its length. I do think as an industry we confuse “providing information to” with “communicating with” our members (and indeed clients). If this helps promote greater understanding of pensions that is indeed a positive. Though there is still time for Guy to change his mind a couple of times.

In November, as noted above Amber Rudd, after her short holiday from government for inadevertently misleading the house whilst Home Secretary (those pesky words again), returned refreshed and replaced Esther McVey as Work & Pensions Secretary. Also the Government published draft EU exit regulations requiring UK pensions schemes to invest predominantly in “UK regulated markets” rather than the current more outward looking “regulated markets”. Given, as I am led to believe, that Brexit is meant in part to signal an even more outward looking UK ready to do business with the world at large this seems to be sending a “slightly” confused message. I am of course using “slightly” here with the meaning ascribed to it earlier in this blog of a lot, considerably, majorly, greatly, massively, and indeed bigly. If unamended the majority of UK pension schemes are likely to be in breach of the regulations from day one of their implementation. I’m hoping something was inadvertently lost in the Amber – Esther hand over meeting.

I started off by saying the usage of certain words appears to have changed. This was further highlighted in December. I had always thought “news” meant something like “newly received information, especially about recent events”. Just recently the pensions press reported the “news” that GMPs had to be equalised. They must have missed the statement in January 2010, from the then Pensions minister, Angela Eagle, (yes, this “news” is so old Labour was still in power), stating that the Government had concluded that schemes should amend their rules to remove any inequality arising from the legislative provisions governing GMPs after May 1990. In other equally contemporaneous “news” it has been announced John Nettles is to retire from his role as DCI Barnaby in Midsommer murders, and an ash cloud associated with the eruption of the Icelandic volcano, Eyjafjallajökull, has closed much of Europe’s airspace. Also in December the year came full circle as the Court of Appeal confirmed that BT could not change the index it uses to calculate pension increases paid in the future to certain members of the BT Pension Scheme from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI).

So that brings us to the end of a slightly random review of some pension stories from 2018 the only link between them being a slightly tenuous claim that the all represent stories which don’t mean what they say or say what they mean – with the honourable rule-proving exception of the Courts in the BT case. And I did slip in one shameless plug for Dalriada.

I am left with a greater understanding of Robert McCloskey, the American author, who once said “I know that you believe you understand what you think I said, but I’m not sure you realise that what you heard is not what I meant.”

Merry Christmas and a Happy New Year and here’s hoping for greater clarity in 2019!