This week was a landmark for UK pensions, with the launch of a new collective pension arrangement offering the potential of better retirement outcomes for millions of people.
On Monday, Royal Mail became the UK’s first employer to offer a collective defined contribution (CDC) pension to staff — six years after it was originally announced.
The government also published plans to boost the take-up of CDC by allowing multiple employers to join a single plan, in contrast to Royal Mail’s single employer plan.
CDC seems to offer a higher and less risky pension than individual DC, as well as boosting investment in UK private assets. But can it really do what it says on the tin?
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Private sector defined benefit (DB) pensions, guaranteed by an employer, are all but extinct, replaced by defined contribution (DC), with people saving into individual pots and taking their own investment and longevity risk.
CDC sets an annual “target pension”, based on the value of assets from employee and employer contributions, plus investment returns. Target pensions are not guaranteed, but can move up or down each year — including for pensions already being paid — depending on asset values.
To fund its ambitious growth plans, the government is trying to push pensions into UK “productive assets”, and it hopes CDC is another pool of money to be invested in infrastructure, start-ups and private equity.
In 2023 major pension providers signed the Mansion House Compact to allocate 5 per cent of assets in the DC “default” funds to private assets, and the government hopes about £50bn will be invested by 2030.
By how much CDC could increase this target depends on CDC take-up, and the allocation to private assets.
Since Royal Mail’s announcement six years ago, no other companies have signed up to CDC, and no pension provider has said it will set-up a multi-employer CDC.
Suppose 10 per cent of DC assets move into CDC, and that CDC holds 10 per cent in private assets, double the Mansion House DC target. Overall DC and CDC private assets would only increase to 5.5 per cent, barely moving the dial versus DC alone.
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But CDC fans claim it can hold a much higher chunk of higher-risk assets than DC, because of “intergenerational risk sharing”, when members of different ages pool investment risk and longevity.
This claim gets to the heart of the CDC fallacy. For any asset allocation, CDC investment risk is exactly the same as DC.
Intergenerational risk-sharing is a myth, because legislation prohibits “buffers” to “smooth” outcomes. CDC plans are not allowed to hold assets in a buffer, to be released when returns are worse than expected, or added to when returns are better than expected, as with discredited “with-profits” policies.
If CDC assets fall by, say, 20 per cent, target pensions also fall by 20 per cent for all members — an 80-year-old pensioner, or a 30-year-old employee.
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This is exactly the same as a DC saver with their own pot. If assets fall by 20 per cent, their “target pension” falls by the same amount.
We shouldn’t fall for the false promise of better retirement outcomes by shifting to complex, opaque and costly CDC pensions
Identical contributions and identical asset allocation produce identical CDC and DC returns, but, of course, CDC comes with higher management costs. The government should not expect CDC to hold any more private assets than DC.
CDC also imposes the same asset allocation on all members, regardless of their age or risk preference. DC gives everyone the flexibility to choose their own level of investment risk, which may change as they approach retirement.
What about Royal Mail’s CDC? It has 6 per cent member and 13.5 per cent employer contributions, giving an inflation-linked target pension of 1/80th of salary, plus 3/80ths cash, from age 67. Over 40 years, members could earn a target pension of half average salary, plus a cash lump sum of three-times pension.
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But this looks unexciting — at today’s inflation-adjusted long-term gilt rates it’s an average return of only gilts plus 1 per cent. A DC saver could achieve the same “target pension” by holding low risk-gilts and corporate bonds, with just a smattering of higher-risk equities.
CDC was really only ever attractive to the few private sector companies still offering DB, not the overwhelming majority with DC. But now the annual cost of DB pension promises has been slashed, thanks to much higher long-term interest rates, these companies have no incentive to close their DB pensions and make the leap into the CDC-unknown.
Although there are no “magic beans” in Royal Mail’s CDC, what sets it apart from “normal” DC is the generous 13.5 per cent employer contribution, higher than most blue-chip companies, and much higher than the 3 per cent legal minimum.
And total contributions of almost 20 per cent of salary are enough for Royal Mail staff to build-up a decent DC pension pot, and a decent pension.
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We shouldn’t fall for the false promise of better retirement outcomes by shifting to complex, opaque and costly CDC pensions. The only real way to improve pensions is with simple, transparent and cheap DC pots, and higher contributions.
John Ralfe is an independent pensions consultant. X: @johnralfe1
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Scottish Widows is killing off the iconic “widow” model featured in its branding for decades, as the £200bn life insurer and pensions provider attempts to modernise the business.
Owned by Lloyds Banking Group, Scottish Widows said it was “phasing out” the widow model and will instead use a digital logo of a woman wearing a cloak.
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The end of the human widow, used in the company’s advertising since the 1980s, is the latest example of a corporate rebranding reflecting a shift to digitally focused services. Deborah Moore, daughter of the late actor Sir Roger Moore, was the first widow.
“Customers will be so accustomed to that brand — will they recognise the new one?” asked Andrew Hagger, founder of consumer finance site MoneyComms.
“Is there a danger that people think of this as a new brand and forget the heritage of the old one?”
Hagger added that the use of a red silhouette instead of a human model “risks dehumanising” the brand, which has existed since 1815. The move was first reported by Citywire.
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Scottish Widows’ new red logo
Chira Barua, chief executive of Scottish Widows, said: “One in four people in their twenties don’t have a pension and 38 per cent of adults are not on track for a minimum lifestyle in retirement, so we need to revolutionise the way people interact with longer-term savings to close that gap.
“Since we started building the app and digital tools, we’ve had phenomenal uplift in engagement and see this as a game-changer in helping people take the right steps now to get the retirement they want.”
Barua said the new Scottish Widows brand is aimed at feeling “more intuitive in digital channels like our app, but with a new look and ‘digital widow motif’ to bring it into a new era.”
James Daley, founder of consumer group Fairer Finance, said: “The Scottish Widows brand has been around a long time and is based on the human story. There’s been a different widow for decades — it’s the end of an era. The human element is relatable to a lot of people.
“The question is, will the new brand resonate with customers? Once you remove the human element, the brand becomes a bit irrelevant.”
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Other companies that changed their brand include asset manager Abrdn. The fund group rebranded from Standard Life Aberdeen in 2021 by removing the vowels from Aberdeen. The company said at the time that the new name was “part of a modern, agile, digitally-enabled brand”.
However, the initiative was widely mocked. “It looked bonkers — why would you take the vowels out?” said Daley. “On the flip side, it got people talking about them.”
Royal Mail came under scrutiny when it changed its name in 2001 to Consignia, which was ditched just 16 months later. The UK postal service eventually rebranded its holding company to International Distributions Services.
Last year, National Express decided to change its name to Mobico as the UK transport group synonymous with long-distance coach journeys sought to project a more global image.
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“Norwich Union was also a fantastic brand with a lot of heritage when they came up with Aviva,” said Daley. “It seemed mad at the time but now it’s just something you say.”
GOING to the theatre at Christmas doesn’t have to be all about PG-rated pantomimes and stories of goodwill.
There are plenty of opportunities for adult-only nights out during the festive season, minus the Christmas cliches.
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There are plenty of shows for adults to enjoy over the Christmas period up and down the countryCredit: Getty
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Rick Astley is returning to the Albert Hall in London this December for a special big band concertCredit: Alamy
We’ve put together a list of some of best Christmas shows for adults happening up and down the country – and a lot of them are definitely no kids allowed!
Multi-million selling global star Rick Astley will be returning to the Royal Albert Hall this December for a special big band concert, performing swing and festive classics.
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The show will see Rick perform in the Hall’s stunning historic auditorium.
Venue: Royal Albert Hall, 17th December.
Catherine Tyldesley is starring in Sheffield’s Christmas pantomime this year, Snow White at the Lyceum Theatre
Direct from down under, Australia‘s favourite adults only Christmas comedy is coming to London.
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Audiences can let loose and indulge in some adult-only ‘elf-care’, with a live band, eight above-average performers, and plenty of surprises from Santa’s sack.
Venue: Southwark Playhouse, 18th November – 11th January.
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The Crown Ballet will be performing The Nutcracker up in Manchester, based on the original story by E.T.A. HoffmannCredit: Not known, clear with picture desk
A show where you definitely need to leave the kids at home. It’s a scandalous twist on the classic fairy tale – Tinderella is a whizz on social media, but it’s all a charade because she has no money, no man and none of the glamorous life she claims to be living. Until one day, she meets not one, but two Princes in the woods…
Expect a night of raucous laughter, innuendos and unexpected encounters.
Winner of four Olivier Awards including Best New Musical in London and the Tony Award for Best Direction of a Musical on Broadway, the smash hit show shares the incredible real life story of the 7,000 air passengers from all over the world who were grounded in Canada during the wake of 9/11.
Experience this joyous story and soaring music as spirited locals and global passengers come together to forge friendships that will stay with them forever.
Venue: The Lowry, 3rd December-5th January.
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Love Actually will be screened live in concert in Liverpool, with a full orchestra playing the score live-to-filmCredit: Alamy
The beloved Christmas rom com, The Holiday will be presented live in concert, as part of a 15 date UK-wide tour, which will see the film’s score played live-to-film with a complete concert orchestra.
The orchestra will also be making stops at London, Birmingham, Poole, Portsmouth, Brighton, Bath, Southend-on-Sea, and Nottingham.
If you’re more of a Love Actually fan, a similar thing will be happening at Liverpool’s Philharmonic Hall.
Love Actually will be screened live in concert, with a full orchestra playing the score live-to-film.
Venue: Liverpool Philharmonic Hall, 2nd December.
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The Ballroom King and Strictly Come Dancing judge joins forces with a dynamic live band, vocalist Lance Ellington, and a troupe of extraordinary dancers for his festive showCredit: Not known, clear with picture desk
Mark Gatiss‘ acclaimed retelling of Dickens’ winter ghost story visits The Rep this Christmas, starring Matthew Cottle as Scrooge and Rufus Hound as Jacob Marley.
Filled with Dickensian, spine-tingling special effects, prepare to be frightened and delighted in equal measure as you enter the supernatural Victorian world of A Christmas Carol: A Ghost Story.
Embark on a dazzling journey into a festive wonderland as Strictly’s one and only Anton Du Beke brightens up your Christmas with his brand new show – Christmas with Anton Du Beke.
The Ballroom King and Strictly Come Dancing judge joins forces with a dynamic live band, vocalist Lance Ellington, and a troupe of extraordinary dancers to bring an evening of music, dance and laughter. He’ll also be performing in London, Cambridge, Southend-on-Sea, Basingstoke, Woking, Leicester and more.
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Venue: B:Music Town Hall & Symphony Hall, 17th December.
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Step Into Christmas features singers, dancers, and speciality acts who give you their hearts and don’t take them away.Credit: Not known, clear with picture desk
Charles Dickens’ beloved tale is brought to life by students from the BA Performance for Deaf and Hard of Hearing Actors programme in a uniquely visual retelling.
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A piece of visual theatre accessible to both deaf and hearing audiences.
Venue: Royal Conservatoire of Scotland, 29th November and 6th December.
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The Northern Ballet will perform A Christmas Carol at Sheffield Lyceum TheatreCredit: Not known, clear with picture desk
This concert of timeless classics is stuffed full of magical music from Christmas film favourites including, The Polar Express, Elf, E.T., Home Alone, White Christmas, and Love Actually.
A festive feast for the senses, Northern Ballet brings one of the most loved stories of all time to life.
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Dickens’ timeless tale is reimagined through dance, music and storytelling which will transport you to Victorian England and leave your heart aglow.
Venue: Sheffield Lyceum Theatre, 7th November.
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Comedians Helen Thorn and Ellie Gibson will be bringing their Scummy Mummies Christmas Show to Tyne Theatre & Opera HouseCredit: Not known, clear with picture desk
Comedians Helen Thorn and Ellie Gibson bring their special Christmas themed comedy show back.
Expect scummy carols, yuletide sketches, festive stand-up and scummy Santa stories.
Venue: Tyne Theatre & Opera House, 28th November.
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Fairytale of New York will feature lots of festive musical numbers, including ‘Driving Home for Christmas’ and ‘Step Into Christmas’ and, of course, ‘The Fairytale of New York’Credit: Not known, clear with picture desk
From the producers of Seven Drunken Nights – The Story of The Dubliners, immerse yourself in the rich tapestry of Irish culture as talented singers, musicians and dancers perform a world class concert.
All the festive favourites will be featured, including ‘Driving Home for Christmas’ and ‘Step Into Christmas’ and, of course, ‘The Fairytale of New York’.
Venue: Sheffield City Hall, 3rd December.
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Keith and Krysten Getty are Grammy-nominated artists known for modern hymns and carolsCredit: Not known, clear with picture desk
Keith and Krysten Getty are Grammy-nominated artists known for modern hymns and carols.
This year’s Christmas tour will feature brand new songs from the duo, along with many of the traditional Christmas carols people have come to know and love.
Belfast’s cult comedy cabaret is back. (G)host with the most, Sir Arthur Chichester (Dan Leith) presents an evening of fiendish festive fun.
Hallow’istmas will be serving up live comedy, music, and the chance to win some fantastic prizes. It also promises to add a little horror to the holidays.
This iconic adult pantomime returns, ballsier than ever.
Be taken on a wild ride through the unconventional tale of Sleeping with Beauty – the faint hearted/prudish have been warned.
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Venue: Waterfront Hall, 28th-29th December.
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The country’s best comedians are coming to Nottingham for a spectacular all-star festive show, including Sara PascoeCredit: Not known, clear with picture desk
Be treated to a festive feast of West End showstoppers performed by Stephanie McKeon, Alice Fearn, Jon Robyns and Scott Davies, accompanied on stage by the West End Theatre Orchestra.
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Expect songs from the greatest musicals, including Mamma Mia!, The lion King, The Book of Mormon, Cabaret, Starlight Express, Frozen and Wicked.
The country’s best comedians are coming to Nottingham for a spectacular all-star festive show.
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Joining Sara is a spectacular line-up with cult comic/poet and Alan Partridge star Tim Key, bumbling charmster Ivo Graham, master character comic Steen Raskopoulos, viral phenomenon Janine Harouni, and BAFTA-winning Taskmaster host Alex Horne as MC.
Venue: Theatre Royal, 18th December.
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Join Bob Cratchit, Tiny Tim and Scrooge himself at the Bristol Old Vic this ChristmasCredit: Not known, clear with picture desk
Told in true Bristol Old Vic style, Tom Morris (The Grinning Man, Swallows & Amazons) joins forces with Lee Lyford and Gwyneth Herbert (The Snow Queen) to present an enchanting new adaptation of Charles Dickens’ timeless tale, A Christmas Carol.
Join Bob Cratchit, Tiny Tim and Scrooge himself in this riot of music and theatrical imagination.
Venue: Bristol Old Vic, 29th November-13th January.
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Aled Jones and the Welsh POPS Quartet will be performing music from The Snowman and other festive favourites in CardiffCredit: Alamy
For two nights only, Soho’s most mischievous drag-diva, Heiress Blackstone, will host the season’s merriest night of international variety. This festive event features a dazzling all star line-up, blending sensational cabaret, breathtaking circus, joyous burlesque and raucous comedy.
Join Heiress and her Christmas favourites for a night filled with laughter, glamour, and festive cheer.
Aled Jones and the Welsh POPS Quartet will be performing music from The Snowman and other festive favourites.
Aled will perform and narrate The Snowman in the first half of the show and in the second half perform some of his own favourite show and classical numbers and then lead a seasonal sing along.
A COUPLE have revealed how they moved into a 50ft narrow boat to save thousands on rent – but are now being hit by a catch.
Alternative-living lovers Danni and Joe moved into a 50ft narrow boat to save thousands on rent but upcoming changes are likely to make their lives a lot more expensive.
The couple bought their canal boat after selling their previous mobile home – a sprinter van – for £12,000 and have been living in it for three months.
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Danni and Joe moved into a 50ft narrow boat to save thousands on rentCredit: youtube/@ItsOhJoe
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The renovation project cost between £15,000-£20,000Credit: youtube/@ItsOhJoe
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One thing they hadn’t accounted for were the number of logs and amount of coal they would need to keep them warm during the winter monthsCredit: youtube/@ItsOhJoe
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When the couple bought the dilapidated boat over a year ago they were expecting their lives to be a whole lot cheaperCredit: youtube/@ItsOhJoe
They’re currently cruising just outside of London, having made their way from the West Country into the city.
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Last year, they posted a video about the savings they were making since opting for a life on water.
But they just warned potential boat-buyers that new Canal and River Trust (CRT) surcharges will increase from April next year.
These are a set of fees for anyone living on canals across England and Wales.
This means anyone on a continuous cruiser, as opposed to someone who is permanently moored, will be paying a surcharge of up to 75 per cent.
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“If you’re moving onto a boat to save money then you need to know this,” Danni said.
For boats with a beam over 2.16m a surcharge of 10 per cent will be applied and for boats over 3.24m this will be an extra 20 per cent.
Danni and Joe said their first license cost them £886.31 but this has since increased to £1065.79.
From April there will be a new license price, which they said will cost about £200 more a year.
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When the couple bought the dilapidated boat over a year ago they were expecting their lives to be a whole lot cheaper.
Hotel owner splashes £55k to build ‘world’s shortest’ canal with locks in garden to float barge converted into a pool
But they quickly discovered that the “boat-life” was far more expensive and complicated than they had anticipated.
Firstly, the renovation project cost between £15,000-£20,000.
Despite having some money left over from the sale of their van, they said they were living “pay cheque to pay cheque” in order to make it liveable.
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One of their biggest challenges to date, the couple said, was when the boat’s battery died and they didn’t have a generator.
“When our battery died we couldn’t use our washing machine,” Danny said.
“You have to take your big bag of clothes along the tow path [to the launderette] and sometimes it’s raining but you need clean pants,” added Joe.
What are CRT charges?
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From narrowboats to barges, canoes to large river cruisers, you need to license your boat if you want to keep and use it on canals and rivers.
All types and size of boat with or without a motor need a licence. Motorised boats include river boats, canal boats and houseboats.
You can buy your long-term licence at any time of the year. They start on the first day of the month and last for either three months, six months or 12 months.
You can also buy a short-term licence at any point of the year. They’re valid for one week or one month.
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Different navigation authorities have different licences and fees. If you are not boating on a CRT network, you will need to contact the relevant authority:
Another thing they hadn’t accounted for were the number of logs and amount of coal they would need to keep them warm during the winter months.
One bulk bag of logs set them back £120.
“You may get this cheaper somewhere else but we don’t have a car in London,” Danni said.
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Whilst bulk buying is more financially-savvy, she added, it can be a logistical pain.
“You need to work out how to get it to the boat,” she laughed.
As for gas on the boat, the adventure-loving couple said they get through a cannister a month, which costs about £50.
Although this could be cheaper if Danni had fewer baths or Joe cut down on baking, they said.
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“We’re gas hungry,” they joked.
Canal boats vary in prices and can cost anything from £30,000 to way over £100,000. For a narrow boat that is fully-equipped and electric it could cost as much as £200,000.
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
BlackRock’s assets under management surged to an all-time high of $11.5tn last quarter as the world’s largest money manager benefited from a rally in markets and attracted record new cash from investors.
The inflows helped push revenues up 15 per cent to $5.2bn, surpassing analysts’ expectations. Improved margins lifted the group’s net income to $1.63bn.
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Assets shot up 26 per cent in the quarter, powered by $160bn in long-term flows and investors pouring an additional $61bn into its cash management products.
The prospect of the US Federal Reserve cutting interest rates attracted money into bond funds, while the S&P 500 climbed 5.5 per cent in the quarter.
“Our strategy is ambitious, and our strategy is working,” chief executive Larry Fink said on Friday. “We are effectively leveraging our technology, scale, and global footprint to deliver profitable growth.”
BlackRock shares are up nearly 20 per cent this year, nearing the record high $971 set in November 2021. They were little changed in pre-market trading on Friday.
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Analysts polled by Bloomberg had expected revenue of $5bn. Adjusted operating income rose 26 per cent to $2.1bn, beating expectations of just under $2.0bn.
The bulk of the new investor money went into the exchange traded funds and index products that are BlackRock’s bread and butter. But New York-based BlackRock is making a concerted push into alternative assets, which command much higher fees.
Its $12.5bn purchase of Global Infrastructure Partners closed after the quarter ended. The Financial Times reported this week that BlackRock is one of several groups looking into a possible purchase of HPS, a private credit manager that spun out of JPMorgan.
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Finding common threads in the European oil majors’ energy transition strategies is not easy.
There is still a somewhat experimental approach across the sector: Eni is building satellite businesses it can sell down, or possibly float. TotalEnergies is growing electricity generation and liquefied natural gas production. BP has pushed into areas such as EV charging — and is reportedly preparing to abandon its 2030 target to cut oil and gas output.
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This week, Equinor added another move to the mix. It has built a 9.8 per cent stake in offshore wind developer Ørsted, becoming its second-largest shareholder behind the Danish government. It should prove a value-creating addition to the strategic sorting hat. But it is not something others will necessarily ape.
Equinor was a relatively early mover in offshore wind. It already has an operational portfolio of about 1GW, and 2GW under construction. In recent years, though, it has often been priced out of European auctions for seabed leases. It has cancelled some early-stage projects as the industry continues to grapple with higher costs.
Given its recent troubles in the US, Ørsted might not look the best of targets. But it has a decent portfolio of 10.4GW of operational renewables assets, plus more under construction. Even if you assumed Equinor paid 10 per cent of Ørsted’s roughly $25bn market capitalisation as of last Friday — the final trading day before the announcement — it looks as though Equinor is getting a decent discount to access a slice of those assets. The total net asset value of Ørsted’s portfolio is about $30bn, estimates Bank of America’s Christopher Kuplent.
Of course, investors may wonder why Equinor does not return more money and let them decide if they want exposure to a large renewables developer. That is an argument oil and gas CEOs will continue to have.
In its defence, Equinor can point to plenty of cash returns already. It has promised total distributions in 2024 of $14bn, including buybacks and dividends — equivalent to nearly a fifth of its market cap. The Ørsted deal should not alter future planned returns. Equinor can easily shoulder the estimated 5 per cent increase in its net debt ratio that Bernstein expects will follow the deal.
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This is unlikely to start a frenzy of renewables stake buying across the industry, however. Not all have the same balance sheet strength. BP, for instance, has faced questions over whether it can meet its $7bn annual share buyback from 2025 onwards.
If Equinor’s latest move is suggestive of any theme, it’s that the European oil majors are still struggling to find a clear path to 2050.
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