Robin Ellison – Beware TPR's Terry Smith problem

Welcome to Emma Douglas

Emma Douglas is being appointed the new chair of The Pensions Regulator (TPR). She will be a safe pair of hands, but she is being immediately faced with the prospect of being forced to sip from a slightly poisoned chalice.

TPR, the Department for Work and Pensions and the Financial Conduct Authority have issued a consultation (not another one says Brenda from Bristol) on value for money (VfM). VfM is motherhood and apple pie; why would any of us object to doing it, and we do it subconsciously every day anyway, especially those of us buy our biscuits from Aldi rather than Fortnums. The document – The value for Money Framework: response to consultation, further consultation and discussion paper – is around 212 pages long and is a masterpiece of dross.

TPR's problem is Terry Smith. Terry Smith's Fundsmith has had a few ropey years recently (see: Patrick Brusnahan, Terry Smith gives three reasons behind Fundsmith Equity's ‘challenging' year, Investment Week, 9 January 2026), but, if we had held it since inception, it would still have proven good value for money for members but probably would have failed the TPR and FCA VfM tests.

How on earth should pension fund trustees measure the value for money of Smith's very sensible decisions, which presently have been affected by a bubble in seven or so stocks?

The VfM document is a flagship of absurdity, but Emma Douglas may have to burn some political capital to get it ditched – as it needs to be, even if only to meet the government's productivity aspirations. Hopefully her board will be supportive.

Pensions and literature

Mick Herron is the author of the Slow Horses books describing a dysfunctional element of MI6, and currently shooting the lights out on Apple TV+. We can buy the twin novellas The Drop and The List in one volume from any decent bookshop; they describe a lugubrious spook failing to report the semi-natural death of a colleague spook so that he can enjoy the dead spy's pension. Maybe the tracing agencies could give MI6 a call.

Pension Schemes Bill 2026: No comment

Some paragraphs from a House of Lords' report:

1. The Pension Schemes Bill was brought from the House of Commons on 5 December. The Department for Work and Pensions has provided us with a delegated powers memorandum ("the Memorandum")… Such are the number of delegated powers in the Bill that the Memorandum runs to 149 pages. The Bill's long title says that it makes "provision about pension schemes and for connected purposes." Unfortunately, this conveys next to nothing about what the Bill does. For a Bill that contains so many delegated powers, we would have found an introductory "purpose" clause helpful – something that would at least have explained to parliamentarians what the Bill was supposed to achieve and facilitated parliamentary scrutiny. This is a 161-page Bill of considerable complexity rendered the more difficult to comprehend by the 119 delegated powers contained in the Bill.

2. The Memorandum (para 28) acknowledges that "the regime for regulating pension schemes is complex". The statutory background is considerable and is heavily amended by the Bill. Even so, the Bill contains more in the way of delegated powers than is normal in bills (in general) and in pensions legislation (in particular).

Source: House of Lords, Delegated Legislation and Regulatory Reform Committee, Pension Schemes Bill report, 17 December 2025 

Regulators and film

Rock Hudson and Doris Day were the George Clooney and Sydney Sweeney of their era. In Lover Come Back, a film in 1961, Rock Hudson plays a louche adman who gets into trouble for advertising a product that does not exist – and is hauled before the Advertising Council, a presumably invented regulator, by Doris Day, a competitor adman (ad, adperson, adwoman?), for his unacceptable behaviour. He manages to get the Council board members drunk and survives the disciplinary action. Nowadays he might have a tougher challenge.

More recently, and not on film, the Information Commissioner's Office (ICO) wanted to fine Capita £45m (in the end reduced to £14m, also egregious) for a successful hacker attack on its pensions administration system in 2023. When the ICO itself commits a breach, which it often does, it simply writes a letter to itself to undertake not to do it again. If it had to pay a fine, of course, it would simply have to charge the rest of us more. Maybe next time, Capita or whoever, should follow Rock Hudson's technique, buy the ICO board members a cocktail and ask them to be sensible. 

Why the West is dying (1): Gestores

Businesses in the EU spend £150bn a year on form filling; large firms have to supply over 1,500 data points in relation to their global supply chains. In Spain there is now a profession of ‘gestores' [regulation managers] who try to manage the paperwork. (Charlemagne, All aboard the EU omnibus, The Economist, 22 November 2025). The Pension Schemes Bill (see above) suggests we in the pensions industry will need a similar new profession copying the Spanish practices. Which will, of course, in due course itself be regulated.

Why the West is dying (2): NFM and FIT

The FCA has issued a policy statement, Tackling non‑financial misconduct (NFM) in financial services - setting out how it is amending its Code of Conduct (COCON) sourcebook to explain how NFM can be a breach of the conduct rules. It also explained how NFM now forms part of its Fit and Proper test for Employees and Senior Personnel (FIT).

The statement includes 46 pages of (very) complex and mostly subjective rules on when it is OK and is not OK to sleep with a subordinate or boss. Please read carefully before attempting any embrace. And maybe we should have read it before the Christmas parties.

Why the West is dying (3): Acrophobia

A 123-page FCA consultation paper on changes to the advice rules on pensions, Adapting our requirements for a changing pensions market, contains the following acronyms: AI, AE, CBA, CCI, CP, COBS, DB, DC, DP, DWP, EANDCB, EIA, FCA, FLS, FSMA, FTE, GAR, GDPR, GMP, IT, KFI, LRRA, LoA, MaPS, MiFID, NBER, PRIIP, PDS, PPA, PV, SICGO, SIPP, SCM, SDR, SERPS, SMPI, SYSC, TPR, UFPLS, UK, and VfM. There won't be many consumers who could manage to gain ten points on Mastermind if it were their specialist subject. The prime minister, who has asked regulators to take it easy on regulation, may not be impressed.

Why the West is dying (4): Ministerial overload

Many of us are watching the US political car crashes with a mixture of horror and amusement. One example is that Marco Rubio who is not only US secretary of state, but also acting US security advisor,  acting head of USAID and acting National Archivist

That's four decent full-time roles managed by one man, and beneficial for the productivity figures in the US. In the UK a proposal for reducing the number of building industry regulators has been issued by Samantha Dixon MP (see: The Single Construction Regulator Prospectus). Her title is minister for building safety, fire and democracy – an unusual portfolio. Not as productive as Marco Rubio, but a tough gig nonetheless. And presumably value for money.

Why the West is dying (5): Jaffa cakes, chickens and omnishambles

Many of us remember the old Jaffa Cake VAT problem, since replicated in relation to gingerbread men and ice-cream sandwiches. More recently the Tax Tribunal issued a judgment on chickens, part of which is reproduced without comment below:

12. On 21 March 2012, HMRC published a consultation document entitled "VAT: Addressing borderline anomalies" which contained numerous legislative proposals to simplify VATA [the Value Added Tax Act 1994], including a proposal for a new definition of hot food in Note (3); namely: "For the purposes of paragraph (b) of Note (3), "hot food" means food which, or any part of which, is above the ambient air temperature at the time it is provided to the customer, other than freshly baked bread" ("the Hot Food Proposal").

13. The reason for the proposed legislative change in relation to the Hot Food Proposal was explained in the consultation document as follows:

"The borderline between hot takeaway food (standard-rated) and cold takeaway food (zero-rated) has for a number of years been the subject of litigation with some retailers arguing that the purpose of heating their food products is to improve their appearance or to comply with health and safety regulations, rather than to enable them to be consumed hot. This litigation has been decided on the facts of each individual case. As a result, the VAT rules in this area have become unclear and increasingly prone to legal challenge, leading to similar products receiving different tax treatment. So, although many retailers and take away outlets charge VAT on the sale of hot chicken products, hot pies, and toasted sandwiches, some retailers and bakery chains sell similar products zero-rated".

14. The consultation period started on 21 March 2012 and ended on 18 May 2012. In respect of the Hot Food Proposal, HMRC invited responses to the question ("the Relevant Question"):

"Does the proposed legislation meet its objective of ensuring that all hot takeaway food is taxed consistently at the standard rate of VAT? If not, why not and what changes are needed?"

15. The Hot Food Proposal was not the only proposed change to VATA announced in the Budget. Several of the government's proposals, including the Hot Food Proposal, proved controversial (The Sun newspaper, for example, ran a "Who VAT all the pies" campaign and the Cornish Pasty Association set up an online petition entitled "Don't Tax My Pasty") and were later modified, leading the then Leader of the Opposition to describe the Budget as an "omnishambles" (which became the Oxford Dictionaries UK Word of the Year for 2012).

Everyone will have an entertaining folk memory of those events, but they also have a serious relevance for us in what they teach us about the purpose behind the legislation giving effect to the Hot Food Proposal as it developed and assumed its final form. That, as we will see, could be a relevant factor in interpreting the current legislation.

16. The then Chief Executive of Morrisons wrote to the then Chancellor of the Exchequer on 31 May 2012 raising the issue of rotisserie chickens in the context of the Hot Food Proposal.

He wrote:

"The fact that this has been called a pasty tax is misleading. It will also capture rotisserie chickens sold hot. Millions of people are buying rotisserie chickens for their evening meal every week. Our research tells us that many of these are our older and less well off customers, who usually buy them to eat cold or heated up later in the day. They are popular with families because they provide a convenient healthy meal for the whole family.

Rotisserie chickens will be taxed because they are sold hot. In reality though, 83% of our customers purchase them to consume later in the day when they've gone cold. We sell them hot because people want to know they have been freshly cooked, and we have to keep them hot for safety reasons. It's frustrating therefore that because a chicken is freshly cooked it will cost customers 80p more than a cold chicken. It will become unaffordable for many of our customers once the retail price pushes through the £5 mark. Two-thirds of our customers already tell us that £4.50 is the most they are prepared to pay."

Source: Morrison v HMRC [2025] UKFTT 01542 (TC) 

Kids v wrinklies

We have all been watching the implosion of French politics driven largely by attempts to rein back the cost of the generous French pension system. We have our own equivalent problems with the size of the welfare state, but German political developments suggest the balance of power may be changing. In the early 1960s there were roughly six German workers for every pensioner; now there are two – and in 2026 a quarter of the total German budget will be spent on state pensions. Now the youth movement of the Christian Democratic Union is objecting to a draft pension reform law which will add to that bill. This may be a straw in the wind, where the upcoming generations for the first time object to the spending on the old (see: The kids are fed up: Young MPs are threatening the coalition over pensions, The Economist, 22 November 2025).

The several (it may be around a dozen or so) current UK inquiries into the pension system might like to think about what our system might be like if the UK generation-whatever find their political voice. One solution might be to convert the old age pension into a disability pension, coupled with a change of mindset so that we are all expected to work until we drop. Spending 30 years on holiday is beyond the expectations of 30-year-olds, and should be for the current pensioners. The Waspies should be grateful for what they get without asking for more.

Pensions xenophobia

Understandably though mistakenly the government is thinking of denying tax neutrality for pension funds that do not invest sufficiently in the UK. Why, the argument goes, should UK pension funds not be patriotic with their money (see: Mary McDougall, Pensions not a ‘plaything' in domestic investment drive, governments warned, Financial Times, 7 January 2026).

Meanwhile as we know the Canadian pension funds lost substantial sums by investing in the UK water infrastructure, and are being asked themselves to restrict their investments to Canada (see: Ilya Gridneff and Mary McDougall, Canada tells pension funds to invest at home in age of ‘economic nationalism', Financial Times, 20 October 2025).

They have the same problem we do, that their Canadian equities had fallen from 28% to 4%. Maybe the reason for the lack of public capital is due to other government rules which discourage such investments. The Canadian industry minister said: "There's a sentiment that we need to think about Canada first and that we need to put capital where our mouth is". Financial xenophobia is normally treated by administering a hefty dose of Adam Smith until the symptoms disappear. 

Whistleblowing

The FCA reports annually on the whistleblowing cases they have; and in Sweden the regulator has been in trouble for revealing the name of a whistleblower who later lost his job. And in the United States whistleblowers can make enough to last them the rest of their lives, even with a yacht and private plane (see: Paul Caruana Galizia, He was a top executive. He blew the whistle — twice, Financial Times, 25 October 2025).

In mid-October 2025 Alecta, Sweden's biggest pension fund, fired its chief actuary for inappropriate criticism of the Swedish Financial Supervisory Authority (see: Rachel Fixsen, Alecta slapped with lawsuit after firing FSA ‘whistleblower' chief actuary, IPE, 17 October 2025). He had submitted a report under the Swedish Whistleblower Act and the EU directive – but the regulatory did not keep the reference private. Curiously our own pensions whistleblowing law was repealed 20 years ago (see: Pensions Act 1995 s48, Pensions Act 2004).

Robin Ellison is, among many other things, the chairman of the College of Lawmakers, a retired pensions lawyer, a visiting professor in pensions law and economics at Bayes Business School, City, University of London and chair of several pension funds