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Phishing and the Wild West 
Recent experiences prompt this one More ...
Unsupportable conclusions 
On train delays and MiFID II More ...
Food for Thought 
Thoughts in preparation for our CIP review More ...
Cashflow forecasts and the GAD 
Reflections on the latest QR of the National Insurance Fund More ...
Your Xmas Video Treat 
J P Sears is bang on the money. More ...
MiFID Matters 
The Beeb and the Tata Steel Pension Scheme 
What's in a word? 
Snog Marry Avoid 
The judicious use of incentives 
The FCA, webform design and TCF 
Undue influence 
On setting the bar 
Weighing the data 
On the joy of not failing
Ah...Cambridge... 
People... 
Disruptive Innovation 
A day in Pictures 
Just. Walk. Away 
Self-Subverting Regulation
Working on your business 
Fatbergs! 
The Stuff of Nightmares 
Short-Termism...again 
How to lose your majority 
The Assessing Suitability Review 
Financial Crime + AML 
A strange interaction 
How 'thick' is your proposition? 
Quick-Start Your Proposition 
A reason to celebrate 
It's OK to be a capitalist 
The Case for Cashflow 
There's always a crash 
Somewhere, close to the brink 
The Persistent Elephant 
Mind the gap 
Merry Christmas 
The ease of negligence 
Brexit: we need entertaining! 
Red sky in the morning... 
Sustainable, or...? 
Advertising and Attention-Span 
Complexity + client understanding 
A world where nothing...quite...works 
Dreaming the dream 
Eve and the Apple
For goodness sake 
Too good to be true? 
Wake up to a new world 
Data in, data out 
Don't be like Yodel 
A little nostalgia is a good thing 
Welcome to my world 
Sorry to brag, but... 
Complaint-Management Models 
Intimations of mortality 
The wonderful world of regulatory permissions 
From alert to supervisory action 
Due-diligence, suitability and all that 
Regulation, the one-way street
The old ways persist
There is sweet irony here... 
'Wot's compliance ever done for us?' 
A man who made his mark 
Messy world planning 
Teabags and Data-Disconnect 
2016: Onwards and Upwards 
On 'Doing Network' 
Tis the season to be whinging 
Futile Forecasting Frustration 
On being deliberate 
Data Matters 
Over a lifetime 
Your money is safe 
What's going on at the FCA? 
The BT Engineer cometh 
Robot IFA, here we come? 
Rethinking the basics 
Independent...or what?
What you write matters 
Be careful out there! 
Crimes against information 
Realism not Cynicism 
A Question of Trust 
Choices, promises and client experience 
Where's Value? 
Just Say No 
Too bright to look at? 
Compliance + Subjectivity 
Fostering the critical mind 
The sidelining of the client 
There be Bear-Traps 
Threats to Sustainability 
2015, Looking Forwards
Merry Christmas! 
Regulation's working... 
Innovation and Self-Service 
The Challenge of Due Diligence 
The joy of Notes 
Re-Evaluating Rebalancing 
It's all joined-up 
Lights, cameras, action, EIS... 
Row over EU 'interim levy' 
Fences make uncomfortable seating
Adviser Mood Swings Need an Explanation
Choppy waters? 
 What's your number?
Freedom 
Independence...again
Is it a maze? 
The risk of risk 
Picking the winners 
All you need is love ...
CoCos...Pop! 
It's a State of Mind
Face to face with the FCA 
Surprised by excellence 
Afloat in the Sea of Ambiguity?
Independence +
Does A Fund's ACD really matter? 
The Future's Bright, the Future's Orange? 
2 + 2 = 4 (or does it?) 
What's smart about smart beta?
Even Marcus needs wellies 
PIMS and the place for products 
Ethical Professionals 
Trusted Adviser...or what? 
Never out of fashion 
Customer Service! 
Tulipomania! 
Adviser Charges - the FCA Thematic Review 
On Not Advising on Mortgages
Ennui about Annuities? 
Where there's a Will... 
Your Proposition 
Justifying our existence 
Getting there safely 
A Network perspective
How to look forwards
The point of promises
Auto-Enrolment Implications
Happy New Year
It's almost Christmas
Merry Christmas to All!
Behold...the new marketplace
What's your commute like?
The illusion of choice
The lust of the eyes
A legacy food nostalgia trip
A good read
A bit of fiscal responsibility
Risky business
Service, service + More Service
A salutary Tale
Sorry doesn't have to be the hardest word
RDR Charging - Media Reporting
Anticipating randomness
When Outreach is Underwhelming
Matching expectations
Uncertainty, planning, hedging
Who is being served?
Reasons to be grumpy
Adequate analysis
Client Reviews
Hey ho!

Cashflow forecasts and the GAD 

Towards the end of 2017, financial-planners were (not unnaturally) obsessing with MiFID II and therefore may not have been sufficiently interested in other matters to have engaged with the publication of the 'Government Actuary's Quinquennial Review of the National Insurance Fund as at April 2015'.  This was published in October 2017. So, if you did not obtain your copy, hot off the press, here is the key chart which ought to have demanded your full attention:

GADNIF2

This shows the working capital balance of the National Insurance Fund (NIF) which, as you can see, is now projected to be exhausted in 2032.  To be fair, the last Quinquennial Review (QR), which represented the position as at April 2010, still showed that the NIF would be out of cash a mere three years later, in 2035.  As financial advisers will already know, the NIF was established in 1948, and it is operated on a pay-as-you-go (PAYG) basis to support State Pensions, Employment & Support Allowances, Bereavement Benefits, Jobseeker's Allowance and Maternity Allowance.

Because the NIF is managed on a PAYG basis, the hope is that that incoming National Insurance (NIC) receipts will largely wash the hands of the outgoing payment of benefits.  The working fund balance tends to be a fraction of the total throughput, and is used to balance income and expenditure, in order to even out timing issues or exceptional liabilities - in that sense, it seems to operate a little like those long-gone, traditional with-profits policies.  It benefits from a Treasury Grant of up to 17% of benefit expenditure, where this is needed to maintain a fund balance of one sixth of the demand - from around 2029 onwards, the NIF will rapidly start hitting that maximum required level of support, to keep pace with outgoings, and within a few years is projected to head north to around 23% of expenditure.  To put it another way, by 2035, the shortfall between projected NIC receipts and benefit exposure will exceed 1% of GDP, and that number is unlikely to fit on your pocket-calculator display.

As any employer (or employee) will know, the National Insurance system is already a considerable burden on the working population.  In the 2017/18 tax year, within band earnings, employees pay NICs at the rate of 12%, whilst employers are contributing a hefty 13.8%  That's an additional combined tax rate of 25.8%, meaning an effective total tax on earnings for a basic-rate taxpayer of 45.8% (excluding allowances).  The calculations of the Government Actuary's Department (GAD) suggest that the combined NIC rate would need to rise to 28%, edging the working population to an effective tax-rate of 50%.  Clearly, higher-rate taxpayers are in for rather more expense than that.

There are reasons for this unpalatable situation.  The pensioner population is increasing much more rapidly than the working population - and even deferring State Pension Age (SPA) doesn't do much more than supply a temporary amelioration to this demographic crisis.  It is evident from the QR that historic net migration figures are in part fuelling the demise of our National Insurance system and the QR attempts some modeling as to how the varying of assumptions relating to fertility, mortality and migration might alter the outcome.  The reality is that the looming crisis is a direct (and, I would say, entirely predictable) result of historic government policy decisions - for this is an exercise in cashflow forecasting, the kind which financial planners engage in, albeit without an actuarial qualification.  Sure, the numbers are much bigger, and the GAD has to deal with data relating to populations, rather than individuals or families - but as you dig through the QR, the realisation swiftly sinks in that none of this is rocket-science.  It is an intriguing thought that there are those individuals who think that humanity can control climate-change via the taxation system, when it is quite clear that we are politically incapable of managing our own national social security budgets.

Are there any practical lessons which one can derive from this sobering report?  I apologise in advance in case some of these are slightly trivial and contaminated by at least a trace of political comment:

  • This QR is dynamite, but so (to be fair) was the last one.  I cannot recall anyone drawing my attention to the previous one, or to any that preceded it.  Instead, we have been, as a profession, utterly absorbed with the endless succession of regulatory initiatives, each of which plops corpulently out of the backside of the regulatory sausage-machine.  Compared to this QR, MiFID II is like a clown on the other side of the road, distracting you whilst you walk in front of the oncoming HGV;
  • The NIF was never a bad idea, but it is wholly a victim of politics.  It seems that our politicians make crazy decisions with nary a consideration of the consequences for normal people over the medium to long term.  We need to be much better than this, if we are to help protect our clients - and decent cashflow forecasting provides you with the ideal tool for that kind of joined-up thinking;
  • I have recently read some (mostly leftwing) pundits asserting that the national finances can be managed in a way that is entirely free of the kinds of disciplines which financial-planners would apply with our clients.  Many of us have argued, over many years, that you cannot manage the national budget without this kind of rigour - and this QR lends support to the view that when our leaders depart from those disciplines, depending instead upon magic money, there comes a day of reckoning;
  • There is the matter of timescales to consider.  You look at the table above, and the dates of the impending National Insurance Catastrophe look far ahead, at least at first glance.  You find yourself, just briefly, contemplating the idea that this might not actually affect you.  It took only a moment to work out that, in 2032 I shall be 73.  I plan to be a sprightly, and active 73-year-old, insofar as that kind of planning has any kind of meaning.  Whatever actually happens to the NIF is going to affect me - so I need to take action now, and plan ahead.  I'm not sure what those plans may look like, just yet, but you can bet your bottom dollar that whatever emanates from Government (irrespective of colour) is going to be tortuous, longwinded, and hopelessly compromised;
  • So, there is an underlying message for your clients:  the Government's going to take your money now, and is unlikely to give you much of it back later on - and, when you're at your most vulnerable, they're going to take what's left - so you need to plan ahead effectively for a decent standard of living, whilst you have the chance.

 


Kevin Moss, 11/01/2018

Phishing and the Wild West 
Recent experiences prompt this one More ...
Unsupportable conclusions 
On train delays and MiFID II More ...
Food for Thought 
Thoughts in preparation for our CIP review More ...
Your Xmas Video Treat 
J P Sears is bang on the money. More ...
MiFID Matters 
A quick exploration of some of the implications More ...
The Beeb and the Tata Steel Pension Scheme 
Kevin has been watching the news, and he's not happy More ...
What's in a word? 
Introduction to 'periodic assessments' More ...
Snog Marry Avoid 
There is no happy outcome with the British Steel Pension Scheme More ...
The judicious use of incentives 
Giving potential customers the right motivation More ...
The FCA, webform design and TCF 
Phew! The RMAR is laid to rest... More ...
Undue influence 
The FCA is flagging up an issue More ...
On setting the bar 
A lesson from the florist More ...
Weighing the data 
Another good justification for cashflow forecasting More ...
On the joy of not failing
It's been a good week More ...
Ah...Cambridge... 
A quick mention about the conference More ...
People... 
Real-world financial planning vs the regulatory world More ...
Disruptive Innovation 
An introduction to new technologies More ...
A day in Pictures 
Office closure on Friday 18th September More ...
Just. Walk. Away 
Reflections based upon some recent contentious cases More ...
Self-Subverting Regulation
Observations prompted by the latest FCA reporting debacle More ...
Working on your business 
IFAs are subject to same principles as everyone else More ...
Fatbergs! 
IFA recycling More ...
The Stuff of Nightmares 
Reflections on the lesson from CP17/16 More ...
Short-Termism...again 
Follow-up to last week's blog More ...
How to lose your majority 
Election lessons for IFAs More ...
The Assessing Suitability Review 
There are lessons here More ...
Financial Crime + AML 
Flagging up the new guidance More ...
A strange interaction 
Surely, these are two entirely disparate and unrelated topics? More ...
How 'thick' is your proposition? 
Easter closure More ...
Quick-Start Your Proposition 
Speed is of the essence More ...
A reason to celebrate 
The first fifteen years More ...
It's OK to be a capitalist 
Like it or not, we are this thing More ...
The Case for Cashflow 
A quick reminder about CashCalc More ...
There's always a crash 
For this, you have insurance More ...
Somewhere, close to the brink 
We've been using OM's systems, and it's not been a happy experience More ...
The Persistent Elephant 
On the PII market More ...
Mind the gap 
An example of regulatory ambivalence which affects Advisers More ...
Merry Christmas 
Christmas message, 2016 More ...
The ease of negligence 
Lifetime cashflows, variable growth rates and market events More ...
Brexit: we need entertaining! 
Reflections on Article 50 More ...
Red sky in the morning... 
The FCA publishes interim findings from its asset management market study More ...
Sustainable, or...? 
Are we building something to last, or just paying the bills? More ...
Advertising and Attention-Span 
Thoughts prompted by marketing surveys More ...
Complexity + client understanding 
More and more information? Or better-quality advice? More ...
A world where nothing...quite...works 
Feedback after our DeFaqto Engage training workshop More ...
Dreaming the dream 
The differences between being awake, and being asleep More ...
Eve and the Apple
The lessons that Apple probably didn't seriously intend More ...
For goodness sake 
Enough of the doomsday scenarios, please More ...
Too good to be true? 
News this week regarding Film Partnerships More ...
Wake up to a new world 
The IFA's role in a Brexit world More ...
Data in, data out 
Some clarity about Clarity's clarity More ...
Don't be like Yodel 
Lessons to be learned about your service proposition? More ...
A little nostalgia is a good thing 
More thoughts on longevity and the advisory process More ...
Welcome to my world 
The RMAR is the new incarnation of the hamster-wheel, but less fun More ...
Sorry to brag, but... 
A recent member visit prompts a few thoughts More ...
Complaint-Management Models 
How other people do it More ...
Intimations of mortality 
Victoria Wood and the critical value of 'What If?' planning More ...
The wonderful world of regulatory permissions 
It's P2P time! More ...
From alert to supervisory action 
The FCA's supervisory actions in relation to pension switches and transfers More ...
Due-diligence, suitability and all that 
Reflections on the FCA's Thematic Review More ...
Regulation, the one-way street
A reflection on recent experiences More ...
The old ways persist
We are surprised by the discovery that commission overrides still exist More ...
There is sweet irony here... 
The demise of Rebus More ...
'Wot's compliance ever done for us?' 
A rumination on the relationship between compliance and professionalism More ...
A man who made his mark 
We are grateful for the memory of Richard Mein More ...
Messy world planning 
Advice when the numbers don't necessarily add up More ...
Teabags and Data-Disconnect 
Lessons learned from the humble teabag More ...
2016: Onwards and Upwards 
The perfect antidotes to anxiety More ...
On 'Doing Network' 
A reflection on ethos and future development More ...
Tis the season to be whinging 
Further reflections on the complaint culture More ...
Futile Forecasting Frustration 
Reflections on the folly of market-timing More ...
On being deliberate 
The benefits of lifetime cashflow planning More ...
Data Matters 
A piece inspired by the FCA's Gabriel system More ...
Over a lifetime 
Some of those old products did actually deliver More ...
Your money is safe 
Kevin is trouble-shooting at the bank More ...
What's going on at the FCA? 
Reflections on our recent experiences with approvals More ...
The BT Engineer cometh 
Observations based upon the inevitable disappointments of the Real World More ...
Robot IFA, here we come? 
What is it that you, uniquely, do for your clients? More ...
Rethinking the basics 
There's a website revamp on the way... More ...
Independent...or what?
Reflections on a telephone conversation More ...
What you write matters 
A few thoughts on the crafting of client documentation More ...
Be careful out there! 
The world IFAs operate in is a challenging one. This is a quick reminder of a useful tool. More ...
Crimes against information 
The myth of objectivity, and what we can do about it More ...
Realism not Cynicism 
A more positive view of regulation? More ...
A Question of Trust 
Thoughts about recruitment and the qualities of human beings More ...
Choices, promises and client experience 
Learning some lessons from party manifestos More ...
Where's Value? 
For when the beach is crowded More ...
Just Say No 
Reflecting on the recent PFS guidance More ...
Too bright to look at? 
The eclipse of DB schemes and the flourishing of risk More ...
Compliance + Subjectivity 
Compliance and financial promotions More ...
Fostering the critical mind 
Inquisitive methodologies and the pensions reforms More ...
The sidelining of the client 
Legacy products, and the insidious decay of our clients' financial capability More ...
There be Bear-Traps 
Some reflections on the pension reforms More ...
Threats to Sustainability 
Reflections on the dynamics of the PII marketplace More ...
2015, Looking Forwards
A positive framework for progress More ...
Merry Christmas! 
The last Blog of 2014 More ...
Regulation's working... 
Recent experiences don't exactly instil confidence... More ...
Innovation and Self-Service 
On anticipating the implications of technical innovation More ...
The Challenge of Due Diligence 
Reflections after ValidPath's CPD Event on BPR solutions More ...
The joy of Notes 
How and why we use information, and how we go about recording it are very important issues. More ...
Re-Evaluating Rebalancing 
Rebalancing methodologies matter More ...
It's all joined-up 
A few thoughts about the use of data-systems More ...
Lights, cameras, action, EIS... 
A great new film, and some thoughts on tax-efficiency More ...
Row over EU 'interim levy' 
Would David Cameron be happy with FSCS Interim Levies? More ...
Fences make uncomfortable seating
It's clearer than ever : you need to decide whether you will engage with AutoEnrolment. Or not. More ...
Adviser Mood Swings Need an Explanation
With a new investigation into due diligence, advisers would do well to have a clear explanation for differences in their attitude to investment solutions More ...
Choppy waters? 
Here it comes... More ...
 What's your number?
The importance and relevance of Management Information cannot be over-stated ... More ...
Freedom 
Yet more thoughts about independence More ...
Independence...again
Further thoughts on the independence conundrum More ...
Is it a maze? 
A few thoughts about ethics More ...
The risk of risk 
How many sources of risk does the IFA need to factor into his/her consideration? More ...
Picking the winners 
A comparison of 2013 and 2014 fund due-diligences is revealing More ...
All you need is love ...
Gill contemplates whether her chocolate habit has lessons for financial planning ... More ...
CoCos...Pop! 
A pre-emptive product-ban from the FCA. More ...
It's a State of Mind
Simple is not the same as easy, as Gill if going to find out next Friday. More ...
Face to face with the FCA 
Follow-on thoughts after our recent review More ...
Surprised by excellence 
A review meeting surpasses all expectations More ...
Afloat in the Sea of Ambiguity?
A new FCA Consultation is on its way! More ...
Independence +
Introducing our new Network-wide DeFaqto provision More ...
Does A Fund's ACD really matter? 
Should advisers avoid fund managers who are still using Capita as their Authorised Corporate Directors? More ...
The Future's Bright, the Future's Orange? 
Are financial planners designing propositions to suit a changing world, and client profile, or are we assuming (wrongly) that the future will be a clone of the past? More ...
2 + 2 = 4 (or does it?) 
Not everything in life is black and white, so advisers should address complexity in their advice too ... More ...
What's smart about smart beta?
Vanguard's Symposium gets Gill thinking More ...
Even Marcus needs wellies 
Advance planning saves the day, every time More ...
PIMS and the place for products 
It's hard work, but someone has to do it! More ...
Ethical Professionals 
On being different, but also proving it More ...
Trusted Adviser...or what? 
The key factor in moulding client relationships More ...
Never out of fashion 
Announcing Parmenion's new SIPP wrapper More ...
Customer Service! 
A reminder of the value to everyone of delivering a great service More ...
Tulipomania! 
How relevant are historic events to current market practices? More ...
Adviser Charges - the FCA Thematic Review 
The FCA's Thematic Review highlights a problem that really shouldn't need fixing More ...
On Not Advising on Mortgages
Thinking about the bigger picture More ...
Ennui about Annuities? 
Gill Cardy, writing from France... More ...
Where there's a Will... 
Highlighting the importance of Will-Planning, and flagging up a new service More ...
Your Proposition 
On why defining your proposition is so important More ...
Justifying our existence 
Reflections on the latest engagement with CMCs More ...
Getting there safely 
Another consideration of risk-management More ...
A Network perspective
Reflections on the network model, from both sides More ...
How to look forwards
One needs a clear view of the way ahead... More ...
The point of promises
Reflections on the boiler-system from hell More ...
Auto-Enrolment Implications
A few practical thoughts for IFAs More ...
Happy New Year
The virtue of setting realistic goals More ...
It's almost Christmas
Closing thoughts and thanks for 2013 More ...
Merry Christmas to All!
The penultimate blog of 2013, highlighting Gill Cardy's arrival More ...
Behold...the new marketplace
So where did all the independent firms go? More ...
What's your commute like?
Risks in the advice process More ...
The illusion of choice
Independence or what? More ...
The lust of the eyes
Why we only want the wrong stuff... More ...
A legacy food nostalgia trip
Bear with me here...there is a connection. More ...
A good read
A review of John Bogle's book, 'The Clash of the Cultures' More ...
A bit of fiscal responsibility
How to encourage decent retirement provision More ...
Risky business
Lessons learned from the documentation More ...
Service, service + More Service
Lessons from an Italian restaurant More ...
A salutary Tale
Before you arrange an annuity More ...
Sorry doesn't have to be the hardest word
One way of resolving our mistakes, and avoiding complaints More ...
RDR Charging - Media Reporting
Reflections on a Daily Telegraph feature More ...
Anticipating randomness
Observations from real life are relevant to financial planning More ...
When Outreach is Underwhelming
Reflections following a FOS Roadshow More ...
Matching expectations
Aside from the marketing, what's really substantive about our advisory proposition? More ...
Uncertainty, planning, hedging
How, exactly, do we enable our clients? More ...
Who is being served?
Recent experiences with customer service present some useful lessons More ...
Reasons to be grumpy
So there are good reasons, after all... More ...
Adequate analysis
A cost-effective investment analytics solution for IFAs More ...
Client Reviews
A quick highlight on this value-added area of your client service proposition More ...
Hey ho!
It's all across the news, so prepare yourself for the onslaught! More ...