2019: Don’t Mention the B Word
End of Year Wrap-Up from Dean McClelland, CEO/Founder
Early in 2019 we finally realised that every time we mentioned the B word, we torpedoed the remainder of any discussion of our comprehensive solution to a major global problem.
Having deleted references to the offending technology from the marketing materials & the elevator pitch, we quickly noticed a difference in the inbox.
The first $200bn institution that came knocking wanted to discuss how we could Uberise pensions using a platform model. Then a $1 Trillion incumbent came next telling us that they were “sick & tired of hearing about us” 😍 before annointing us as “the World’s 1st RetireTech” and extending the hand of friendship:
These sort of inbound contacts are continuing to arrive but not unexpectedly for an industry that hasn’t innovated in a couple of centuries, the talks move at a glacial pace.
Enter the Regulators
In 2019 we got to talk with a lot more regulators. Initial reactions ranged from “the math cannot possibly work” (in fairness, not every regulator has time to keep up with the publications of the global association of Chartered Financial Analysts) to my personal favorite: “What I like most about (the solution as described in generic terms) is that it sounds like a real Tontine”. We continue to escalate discussions with this crucial group of stakeholders.
Enter the Governments
The year saw Canada announce new tax breaks for types of tontine style pensions and in the UK, the Royal Mail Pension Fund received government approval to convert their existing scheme to the UK’s first collective defined contribution (“CDC”) pension which is a type of Tontine.
Despite predictable lobbying from the insurance industry, the conversion won the approval of 90% of the members 🙌 triggering the UK government to launch a cross industry consultation to develop a framework that could guide the direction of the emergent CDC/Tontine industry.
Unsurprisingly to us, the consultation pointed out several special considerations that should be taken into account when designing CDC-style tontine pensions which notably included:
- How to offer increased transparency to scheme members?
- How to prevent scheme actuaries from being pressured into manipulating the numbers due to commercial pressure?
In respect of these issues, the consultation concluded that an annual report from the Chairman of the trustees should communicate what payout adjustments will be required in the coming year and why the actuaries & trustees came to such decisions.
In my personal opinion, the centuries old annual report approach has many weaknesses. For example, I can envisage a scenario where after the next stock market crash, many schemes will continue making unsustainable payouts for a year or more before making adjustments and new contributions during that period will have been invested based upon overly optimistic payout projections.
As a result of the over-payments of course, the payout cuts when they arrive will be necessarily more drastic at that point which will only further increase the pressure on the actuaries.
History shows that such pressure is as effective in recent times as it was in centuries past in getting the actuaries to sign off creative ways to ensure that projected payouts look commercially attractive to new participants.
Initially I was disappointed at having missed the opportunity to participate in the consultation but in hindsight it’s probably good for us that we will be the only participant in the emergent industry that so substantially raises the bar for oversight, governance, transparency and overall user experience.
Let the Execution begin:
With a lengthening queue of asset management/channel partners, the growing support of regulators & the continuing interest of growth stage VCs, the project risk has now lowered dramatically.
From a technical perspective we also now have a range of options that enable us to take a low risk approach to getting a fully compliant platform into production within the coming months.
From then on in, its all about finding, empowering & supporting first class people to do help make this all happen as quickly and smoothly as possible. That’s easy to say but harder to do although it is helpful if this is not your first rodeo.
The Tontine 20s:
Inevitably there will be more speedbumps in the road ahead but we are now looking at getting launched in at least 2 markets this year, one market where we get to drive up the savings rate & another where the population already has savings but are ready to swap that for a lifetime income.
This way we get to test, learn & iterate on different aspects of the behavioural science in parallel which is the part of the process that I am relishing most.
I am reticent to jinx us by predicting which markets & which partners will be online first but we absolutely look forward to being able to share more details when it’s appropriate to do so.
In the meantime, we wish all of our fellow Tontiners a Happy & Prosperous New Y̶e̶a̶r̶ Decade.
Regards,
Dean & the rest of the Tontine Team.
