Macroeconomics, the economy, inflation etc. *likely to be very dull*
Comments
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I absolutely agree with the economist that the UK pension market is super fragmented and has far far too many pension funds to be beneficial to customers. The amount of intermediation needed to service a market like that is vast.
Canada, a comparably sized country, has pension funds with the following size:
OTTP: $240bn
PSPP: $150bn
OMERS: $120bn
Healthcare of Onterio PP: $120bn
CPP: $110bn
By comparisons the UK has USS around $90bn and beyond that they’re too small to run in house. NatWest are around $50bn
They all run their investment in house which is cheaper than paying asset managers to run it for them (no expensive salespeople to pay for) and their ticket sizes are so large for the investments they do want to farm out that they can really squeeze fees. If you’re rocking up with a few bill to deploy, the third party managers will be fighting like rats in a bag to get it.
Their average ticket for a fund would be substantially more than your entire pension fund, SC.
That means fewer and lower fees, easier asset allocation management.
At those sizes you can pay good market rate to get great investors to run your money in house and those investors don’t need to worry about fickle clients or going on the road to persuade clients to listen to the overpaid salesperson to allocate some money. They just get on and run it.
The bigger funds also run their asset allocation in a much more sophisticated way; the size means they think differently about beta and alpha. And at that size they can indeed get stuck into different parts of the market that feel small to them but are massive to that part of the market.
UK market has a massively over endowed consultant market. If you do UK institutional sales for an asset manager, you basically shmooze the consultants for 70% of your time and only the rest is direct. It’s massively inefficient.
What is so fundamentally different about Canadian pension risk appetite versus UK, SC? Similar demographics, similar size sector?0 -
It’s worth noting which company just proposed a $19bn investment in the UK? Aussie pension funds.
They’ve got the scale to go chucking around big money.0 -
How much do individuals and employers contribute in Canada v UK?rick_chasey said:
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What is so fundamentally different about Canadian pension risk appetite versus UK, SC? Similar demographics, similar size sector?
Might affect fund sizes. I'm insignificant but wouldn't want a high risk pension fund.The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
I suspect when you're running a 300m pension fund you do not have access to a whole load of asset classes than when you're running $200bn.pblakeney said:
How much do individuals and employers contribute in Canada v UK?rick_chasey said:
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What is so fundamentally different about Canadian pension risk appetite versus UK, SC? Similar demographics, similar size sector?
Might affect fund sizes. I'm insignificant but wouldn't want a high risk pension fund.0 -
Point is, how do you get to $200bn?rick_chasey said:
I suspect when you're running a 300m pension fund you do not have access to a whole load of asset classes than when you're running $200bn.pblakeney said:
How much do individuals and employers contribute in Canada v UK?rick_chasey said:
...
What is so fundamentally different about Canadian pension risk appetite versus UK, SC? Similar demographics, similar size sector?
Might affect fund sizes. I'm insignificant but wouldn't want a high risk pension fund.The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
have fully funded public sector DB funds that are open to new accrualpblakeney said:
Point is, how do you get to $200bn?rick_chasey said:
I suspect when you're running a 300m pension fund you do not have access to a whole load of asset classes than when you're running $200bn.pblakeney said:
How much do individuals and employers contribute in Canada v UK?rick_chasey said:
...
What is so fundamentally different about Canadian pension risk appetite versus UK, SC? Similar demographics, similar size sector?
Might affect fund sizes. I'm insignificant but wouldn't want a high risk pension fund.0 -
Ah, good.surrey_commuter said:
have fully funded public sector DB funds that are open to new accrualpblakeney said:
Point is, how do you get to $200bn?rick_chasey said:
I suspect when you're running a 300m pension fund you do not have access to a whole load of asset classes than when you're running $200bn.pblakeney said:
How much do individuals and employers contribute in Canada v UK?rick_chasey said:
...
What is so fundamentally different about Canadian pension risk appetite versus UK, SC? Similar demographics, similar size sector?
Might affect fund sizes. I'm insignificant but wouldn't want a high risk pension fund.
So taxes would have to increase to fund this. Wonderful.The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
The simple answer to your question is that they have a different funding model to public sector provisions than we do.rick_chasey said:I absolutely agree with the economist that the UK pension market is super fragmented and has far far too many pension funds to be beneficial to customers. The amount of intermediation needed to service a market like that is vast.
Canada, a comparably sized country, has pension funds with the following size:
OTTP: $240bn
PSPP: $150bn
OMERS: $120bn
Healthcare of Onterio PP: $120bn
CPP: $110bn
By comparisons the UK has USS around $90bn and beyond that they’re too small to run in house. NatWest are around $50bn
They all run their investment in house which is cheaper than paying asset managers to run it for them (no expensive salespeople to pay for) and their ticket sizes are so large for the investments they do want to farm out that they can really squeeze fees. If you’re rocking up with a few bill to deploy, the third party managers will be fighting like rats in a bag to get it.
Their average ticket for a fund would be substantially more than your entire pension fund, SC.
That means fewer and lower fees, easier asset allocation management.
At those sizes you can pay good market rate to get great investors to run your money in house and those investors don’t need to worry about fickle clients or going on the road to persuade clients to listen to the overpaid salesperson to allocate some money. They just get on and run it.
The bigger funds also run their asset allocation in a much more sophisticated way; the size means they think differently about beta and alpha. And at that size they can indeed get stuck into different parts of the market that feel small to them but are massive to that part of the market.
UK market has a massively over endowed consultant market. If you do UK institutional sales for an asset manager, you basically shmooze the consultants for 70% of your time and only the rest is direct. It’s massively inefficient.
What is so fundamentally different about Canadian pension risk appetite versus UK, SC? Similar demographics, similar size sector?
I don't get your Nat West £50bn argument.
A closed DB scheme' only purpose is to pay promised benefits to it's members over the next 80 odd years. They will have aligned those assets to the known liabilities so the pot of moneydoes not run out.
The only reason to sell out to a 3rd party is because it makes the promise to pay those benefits more secure0 -
The statement around the size of schemes shows a complete lack of understanding of the UK pension market.
Since around 2003, all private sector schemes that are open have moved to DC. Most are set up on a Group Personal Pension basis rather than an Occupational Money Purchase basis (ie individual cup cakes on a large plate, rather than a slice of a single cake).
All those GPP schemes (which includes all those new auto enrolment schemes) are outsourced to the large pension providers. So just because employer A has only 12 employees in their scheme, it does not mean that the scheme is being indivudually or bespoke managed. There will be a default investment strategy, managed externally.
In really, it would be fairer to compare the total size of the pension books of the likes of Aviva, Royal London, Aegon, Scottish Widows etc. because those in reality are the schemes, not the sub-schemes of thousands of small employers.
And as others have said, the DB schemes are in wind down, so adding risky assets is not going to happen.
And in the GPP, nor is venture capital if the policyholder is medium risk or lower.
I have a feeling that the Canadian public sector schemes are largely OMP type, and thoat is wehat is being referred to above, whereas in the UK, most public sector schemes are unfunded DB.1 -
Those providers are charging fees on all of that though.
They are not funds running their money in house.
And the demographics are the same in canada as the UK so the aggregate liabilities of the sectors should be broadly the same, surely?0 -
Not sure I understand what you are saying there rick. Most of the money with Royal London is in their own funds for example. Fees on a £200k pot with Royal London are 0.4% pa.rick_chasey said:Those providers are charging fees on all of that though.
They are not funds running their money in house.
And the demographics are the same in canada as the UK so the aggregate liabilities of the sectors should be broadly the same, surely?
There really aren't many OMP DC schemes open to new entrants in the UK because GPP is far more effiicent for the employer and far more flexible for the employee.
Canada has a much younger population than the UK I'd I thought so not the same demographic.
The only area where VC might be appropriate in the mainstream GPP market is for the under 45s or those older with a high tolerance to risk. It certainly isn't appropriate for the 50+ average Joe.
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Our company uses Aviva and we get charged a platform fee as well as fund fee(s). Is that not the norm?Dorset_Boy said:
Not sure I understand what you are saying there rick. Most of the money with Royal London is in their own funds for example. Fees on a £200k pot with Royal London are 0.4% pa.rick_chasey said:Those providers are charging fees on all of that though.
They are not funds running their money in house.
And the demographics are the same in canada as the UK so the aggregate liabilities of the sectors should be broadly the same, surely?
There really aren't many OMP DC schemes open to new entrants in the UK because GPP is far more effiicent for the employer and far more flexible for the employee.
Canada has a much younger population than the UK I'd I thought so not the same demographic.
The only area where VC might be appropriate in the mainstream GPP market is for the under 45s or those older with a high tolerance to risk. It certainly isn't appropriate for the 50+ average Joe.- Genesis Croix de Fer
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It will vary between providers and how the pension has been set up. Not all schemes use a platform (Royal London don't for example). I think Aviva have both an on and an off platform personal pension. The on platform one gives acces to a much wider investment choice including managed portfolio solutions.pangolin said:
Our company uses Aviva and we get charged a platform fee as well as fund fee(s). Is that not the norm?Dorset_Boy said:
Not sure I understand what you are saying there rick. Most of the money with Royal London is in their own funds for example. Fees on a £200k pot with Royal London are 0.4% pa.rick_chasey said:Those providers are charging fees on all of that though.
They are not funds running their money in house.
And the demographics are the same in canada as the UK so the aggregate liabilities of the sectors should be broadly the same, surely?
There really aren't many OMP DC schemes open to new entrants in the UK because GPP is far more effiicent for the employer and far more flexible for the employee.
Canada has a much younger population than the UK I'd I thought so not the same demographic.
The only area where VC might be appropriate in the mainstream GPP market is for the under 45s or those older with a high tolerance to risk. It certainly isn't appropriate for the 50+ average Joe.
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You are not listening to the explanation given.rick_chasey said:Those providers are charging fees on all of that though.
They are not funds running their money in house.
And the demographics are the same in canada as the UK so the aggregate liabilities of the sectors should be broadly the same, surely?
My responsibility as a pension trustee is to ensure that we have adequate funding to meet the pension promises.
It very specifically is not my responsibility to maximise the potential return on investments.
Your examples are public sector funds still open for accrual. My guess is that they pursue higher returns in an attempt to minimise future contributions1 -
Yes, but in aggregate, across the whole sector, the liabilities to the pensioners is the same, is it not? Similar demographics ,similar spread of pension liabilities, etc.surrey_commuter said:
You are not listening to the explanation given.rick_chasey said:Those providers are charging fees on all of that though.
They are not funds running their money in house.
And the demographics are the same in canada as the UK so the aggregate liabilities of the sectors should be broadly the same, surely?
My responsibility as a pension trustee is to ensure that we have adequate funding to meet the pension promises.
It very specifically is not my responsibility to maximise the potential return on investments.
Your examples are public sector funds still open for accrual. My guess is that they pursue higher returns in an attempt to minimise future contributions
So in aggregate, the risk profile should be the same. But in reality, the UK pension sector performs worse for a similar liability profile.
So there is a missmatch there. I can't really see the advantage of having tonnes of sub-billion pension funds all fragmented all over the place. If your fund is at $300m, there is a whole world of asset classes you're unable to get into, regardless of your liabilities, because of lack of scale.
The sector is ripe for consolidation, just like the Dutch sector was, where they went from around 1000 funds to around 200 in the last 15 years (similar sized market too).
Are you saying the UK pension sector is unusually underfunded versus other countries? and if so, is that not because in part of poorer performance for the same liability profile?0 -
Rick, no, you are comparing apples with pears.
The UK occupational schemes and DB schemes are in wind down. There are no private DB schemes open to future accrual in the UK, so the sole aim of the trustees is matching assets to liabilities.
Those Canadian schemes are funded public sector schemes, so the equivalent to the UK's OMP schemes. However the Canadian schemes are open to employees. The UK ones generally are not.
Different aims, different objectives.
And no the demographics are not the same.0 -
In aggregate, which bits are in winddown and which aren't are irrelevant as they will just be matched to the liabilities as they are mainly related to demographics. Whether it 's DB or DC is irrelevant in aggregate?!Dorset_Boy said:Rick, no, you are comparing apples with pears.
The UK occupational schemes and DB schemes are in wind down. There are no private DB schemes open to future accrual in the UK, so the sole aim of the trustees is matching assets to liabilities.
Those Canadian schemes are funded public sector schemes, so the equivalent to the UK's OMP schemes. However the Canadian schemes are open to employees. The UK ones generally are not.
Different aims, different objectives.
And no the demographics are not the same.
Canada has a similar age demographic to the UK: in 2020, 19% of Canada was over 65 and in the UK it is 18.7%, so the liability profile is similar.
Forget Canada, the Dutch is similar too. They also underwent massive consolidation, from 1000 to 200 funds. It is possible.
It's the same pie; same liabilities, same AUM. Only now it's spread over 200 firms, not 1000. That allows for better access to a wider range of asset classes, allowing for more efficient asset allocation, more efficient use of external providers and reduces the amount of returns lost for pensioners via intermediation.
It also provides a better capital market structure for companies looking for capital, so win win.
The whole argument is the UK sector is arranged badly, and so prevents the kind of appropriate investment both pensioners deserve and the economy needs. All you're doing is supporting that argument.0 -
No Rick, it is not the same.
For starters, DB and DC are VERY different beasts for starters. Ther liabilities are completely different - DB all the liabilities are on the scheme/employer. The scheme has to absorb the longevity risk.
There is no longevity risk in DC as there is no promise of a pension, just a fund to be used at retirement.
Why is big better? It reduces choice, reduces flexibility, reduces opportunity for the individual. Retirement is no long a point in time, it is a journey, and people retiring require flexibility.
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Look, come back to me when you work out what I mean by "in aggregate".Dorset_Boy said:No Rick, it is not the same.
For starters, DB and DC are VERY different beasts for starters. Ther liabilities are completely different - DB all the liabilities are on the scheme/employer. The scheme has to absorb the longevity risk.
There is no longevity risk in DC as there is no promise of a pension, just a fund to be used at retirement.
Why is big better? It reduces choice, reduces flexibility, reduces opportunity for the individual. Retirement is no long a point in time, it is a journey, and people retiring require flexibility.
Most countries are going through the DB/DC transition at the same pace at the same time.
I refuse to believe the aggregate liabilities of the canandian sector are that different to the UK's. It's just arranged differently
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Rick, you don't know what you are talking about but we are being very polite so your first sentence was unecessary.rick_chasey said:
Look, come back to me when you work out what I mean by "in aggregate".Dorset_Boy said:No Rick, it is not the same.
For starters, DB and DC are VERY different beasts for starters. Ther liabilities are completely different - DB all the liabilities are on the scheme/employer. The scheme has to absorb the longevity risk.
There is no longevity risk in DC as there is no promise of a pension, just a fund to be used at retirement.
Why is big better? It reduces choice, reduces flexibility, reduces opportunity for the individual. Retirement is no long a point in time, it is a journey, and people retiring require flexibility.
Most countries are going through the DB/DC transition at the same pace at the same time.
I refuse to believe the aggregate liabilities of the canandian sector are that different to the UK's. It's just arranged differently
When you talk about profile the Canadian schemes will have memebers as young as 21 all the way through to 100 with billions paid in each year.
The profile of a UK DB fund will be a minimum age of 40 through to 100 and crucially no new accruals.
Your mistake is common to non-pension people in that you see it as am investment fund and so want to max the return. We have exactly this problem with our Board who don't understand why we have a target of Gilts +2%2 -
No I do, you're just looking at the wrong end of the telescope.
I'll spell it out.
UK and Canada has roughly the same amount in DB and DC across the entire pension sector.
Yes, obviously DB and DC have totally different liability profiles, but add them all up for literally every pension in the country and the profiles look the same.
Plus, they also look very similar to the Dutch market, for the same reasons.
The Dutch market used to be like the UK Market, with 1000s of small funds, and a handful of big ones. That has gone through a huge consolidation, and it is now more beneficial for pensioners in terms of costs and returns.
You lot are talking about individual funds. This is about the sector - who gives a sh!t about individual funds. Irrelevant.
The liability profile is the same (that covers your DB/DC issue), but the market structure is different.
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Bit confused what point you are trying to make Rick, you bought up the differences in fund sizes and number of funds a page ago, now you are saying they are irrelevant and it is about the sector.- Genesis Croix de Fer
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UK and Canada has roughly the same amount in DB and DC across the entire pension sector.rick_chasey said:No I do, you're just looking at the wrong end of the telescope.
I'll spell it out.
UK and Canada has roughly the same amount in DB and DC across the entire pension sector.
Yes, obviously DB and DC have totally different liability profiles, but add them all up for literally every pension in the country and the profiles look the same.
Plus, they also look very similar to the Dutch market, for the same reasons.
The Dutch market used to be like the UK Market, with 1000s of small funds, and a handful of big ones. That has gone through a huge consolidation, and it is now more beneficial for pensioners in terms of costs and returns.
You lot are talking about individual funds. This is about the sector - who gives a sh!t about individual funds. Irrelevant.
The liability profile is the same (that covers your DB/DC issue), but the market structure is different.
This is wrong for all the reasons we explained to you earlier.
In the UK the private DB schemes are shut for new accrual ad are being run off and most public sector schemes are pay as you go so have no investments.
The Canadian schemes you mention are are funded and are still open to future accruals.
The UK public sector has £2-3trn unfunded pension liabilities.0 -
I mentioned the funds *to illustrate the market make up* which is a consolidated industry.
Why on earth did the Dutch also embark on a massive consolidation over a 15 year period?
Canada does have a tonne of closed DB funds - almost as many as the UK.
Which makes sense if you think about it.
The UK is not a unique pension market. It is just not well regulated, and inefficient, small, cottage pension funds are allowed to bumble along providing sub-par performance to pensioners.0 -
your last 5 words suggest you do not understand the difference in goals between a DB and DC investment strategy.rick_chasey said:I mentioned the funds *to illustrate the market make up* which is a consolidated industry.
Why on earth did the Dutch also embark on a massive consolidation over a 15 year period?
Canada does have a tonne of closed DB funds - almost as many as the UK.
Which makes sense if you think about it.
The UK is not a unique pension market. It is just not well regulated, and inefficient, small, cottage pension funds are allowed to bumble along providing sub-par performance to pensioners.1 -
I remember placing the head of fixed income at a very large DB pension fund and the feedback on the outgoing guy was “there is more to managing the liabilities than just buying a load of gilts”.surrey_commuter said:
your last 5 words suggest you do not understand the difference in goals between a DB and DC investment strategy.rick_chasey said:I mentioned the funds *to illustrate the market make up* which is a consolidated industry.
Why on earth did the Dutch also embark on a massive consolidation over a 15 year period?
Canada does have a tonne of closed DB funds - almost as many as the UK.
Which makes sense if you think about it.
The UK is not a unique pension market. It is just not well regulated, and inefficient, small, cottage pension funds are allowed to bumble along providing sub-par performance to pensioners.
If you’re at £300m I doubt the alternatives are available to you.0 -
I love how the recruitment consultant thinks he knowsmore about pensions than the pension trustee and IFA.....
I'm also pretty sure he doesn't understand the difference between the schemes in the DC sector. Pretty much every scheme set up in the last 20 years is on a GPP basis not an OMP basis.
There really aren't 10s of thousands of these small OMP schemes around.
They have been replaced by the GPP model wehich is much better suited to the employer and employee. All the new auto-enrolment schemes are on the GPP basis.2 -
Be as snobby as you want, I’m in the room speaking to leaders of the industry on a regular basis; that’s what informs my view (and presumably the economist article > they’re probably speaking to the same people)
I suspect that’s rather closer to the expertise than an IFA in the sticks if you want to do a p!sing contest based on your job.
After all, what interest would a IFA have in a fragmented and over intermediated pension system?0 -
I’d be curious to know what the defence is of having so many small pension funds in such a large market? What does that achieve0
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You are obviously in a bad mood and are just being obnoxious.rick_chasey said:I’d be curious to know what the defence is of having so many small pension funds in such a large market? What does that achieve
You are not in the mood to listen but at some point in the future you will realise you know nothing about this subject.3
