If you’re used to reading the Vision of the Pension Plowman, you’ll know me- Henry Tapper. I’ve posted more than 3500 times in the last ten years.
That blog’s for pension people, but most people aren’t going to spend their time reading about pension stuff – unless it’s really meaningful to them and their finances.
So – to cut to the chase, I’ve started a new venture aimed at simplifying pensions. I’ve called it AgeWage, because that – in one word – is what a pension is – a wage in retirement that lasts as long as you do!
At the heart of AgeWage is a reckoning called the AgeWage score. It’s a single number between 1 and 100 we give to your pension pot to tell you the value you’ve got for the money you’ve paid in.
To get to the AgeWage score we need what’s called a “contribution history”. That’s a file of all the contributions you’ve ever made and what they bought at the time. If we compare your contributions and what they bought with the value of your pension pot today, we can see how much your contributions have increased by – we call this the internal rate of return (IRR).
We compare the AgeWage score with another fund – we call that other fund the benchmark fund- it’s one we’ve made up. What we actually do is to notionally invest your contributions into the benchmark fund and see what you would have got if you’d invested there instead.
Another word for the benchmark score is the “fifty score” , because the benchmark is supposed to be the average and fifty is the average between 1 and 100! If when we compare the IRR if you invested in the benchmark or fifty score, and it’s higher than what you got, you’ve not done as well as average, the opposite is also true.
This is what we mean by simplifying pensions. We think the first thing you want to know about your pension pot is how it’s doing and that’s what the AgeWage score does. It doesn’t hang about!