Pensions
Should Nest have been put on probation before the restrictions were lifted?
Wednesday, July 17th, 2013

Nest, the pension scheme that will soon be one the UK’s most important with a huge proportion of the workforce signed up to its own particular investment approach has uncovered a rather unfortunate fraud issue with one of its suppliers.

The chief Tim Jones is to forgo his bonus as a result, as Professional Pensions reports today which seems fair enough. But surely, the wider question is whether the lifting of the Nest restrictions should have been announced – admittedly in 2017 - before the wider world knew of the problems there.

There is rather a lot of ideology involved in the decision as well as many practicalities. The ideological side of the equation involves a deep seated suspicion of the private pension industry which pervades all parties and their policies though more so those to the left of the political spectrum. The practical issue is that the contribution limit would have restricted Nest in its appeal though it might helped concentrate  minds within the organisation on focusing on schemes and members that other pension firms didn’t really want - actually quite a noble calling. However, the government clearly wants Nest to make money and not require any further subsidies.

But surely Nest should have been put on probation first. It is unfortunate that this news comes to light not long after that decision had been made.

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Pay rise or not, why don’t MPs have to have their pension with Nest or is it not good enough for the likes of them?
Thursday, July 11th, 2013

Intriguing that in the MPs’ salary debate, a move to a career average system from a final salary one, is seen as something MPs would concede in return for more money. That sounds okay but it also involves them contributing substantially less (teachers take note). Anyway I made the following argument today wearing a journalistic hat for a consumer audience on Mindful Money. I suggested that since MPs are currently debating pension legislation which will see most people in DC of some form, that perhaps they should be in DC too.

Having mulled this a little further and given the news about the lifting of Nest restrictions and the fact the OFT is now worrying away at AE pensions set up under commission, perhaps MPs should automatically be entered into Nest, and quite obviously with no advice attached unless they were prepared to pay for it.

The ultimate in alignment of interests between elected and electorate. And it could be in return for a pay rise obviously if everyone else in the UK gets a pay rise too. Fair enough surely?

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Friday thoughts – Out of date portfolio theory/ Pension fight pen / China’s misselling risk
Friday, June 21st, 2013

Chris Gilchrist has slated modern portfolio theory in Money Marketing this week because it can’t cope with financial crises which is, obviously, a slight problem at the moment. But it is the following point which catches our eye at the Money Debate.

“I regard it as unfortunate that the exam creators at the CII and elsewhere continue to regard MPT as holy writ. More than 10 years of increasingly sceptical academic commentary has yet to make it into the exam syllabus.”

Er quite. But isn’t it time the CII justified itself? If the papers are behind the curve or worse just propounding something that is wrong, then surely it is time to adapt things or if not to explain why not. “Theory used as basis of much investment advice is out of date” is not a great headline for the sector. Last thing it needs in fact. Views welcome.

At the Money Debate we can’t help but refer readers to a rather fiery pensions argument on Henry Tapper’s linkedin group/website/plan for world domination, the Pensionplaypen. It really is too good to miss.

On several occasions, in the last few months, John Lawson pension expert at Aviva has been hitting back at advocates of the Dutch solution which has suddenly got much more timely now the pension minister is also making noises in that direction.

It’s worth reading if only for John’s views of the Royal Society of Arts. It’s the biggest pension row in the neighbourhood at the moment.

Finally, it looks like China is having a credit crunch of its own, but one significant reason is the existence of a shadow banking sector running off the balance sheet (or on another balance sheet!) in many of China’s banks. There may be $2trillion in shadow banking according to Fitch but some of it is in the form of short term ‘wealth management’ products which circumvent centralised controls of lending. Could this be the first time something akin to retail misselling and misbuying has threatened the global economy?

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