Duncan Buchanan talks defined ambition, guidance guarantees, and getting out his comfort zone
Duncan Buchanan started his career as a corporate lawyer. “But I realised it was late nights, sitting around eating biscuits and drinking coffee, waiting, in those days, for a fax to arrive,” he recalls.
“A trustee came in one day with a pension scheme and said, ‘We’ve been told we’ve got to update it.’ I said, ‘I’ll give it a go,’ because it was quite a small firm.
“I started to realise that there’s a huge amount of law in pensions. We’ve got pensions legislation, trust law, tax, a bit of employment law. And you actually get to read the law, whereas as a corporate lawyer, you spend all your time project managing transactions. I felt that it was an area that I wanted to be in.”
Buchanan joined the “friendly” Association of Pensions Lawyers and hasn’t looked back since. He’s now a partner in Hogan Lovells’ pensions team.
We are speaking in Hogan Lovell’s office, high up in a room with fantastic views of London’s Smithfield Market, because he has just been appointed president of another association: the Society of Pension Consultants (SPC).
As a lawyer, does Buchanan worry about taking on the presidency of a pensions association with ‘Consultants’ in its title? “We are a broad church, made up of a number of professionals from throughout the industry,” he replies.
“We’ve got to make the guidance guarantee work, and we’ve got such a short time period to make it work in”
He does concede that representing such a broad industry will be a challenge. “Roger [Mattingly, the SPC’s outgoing president] said to me, ‘You’ve got to be prepared, Duncan, to go out of your comfort zone.’ I think [lawyers are] very used to being very precise and advising on really technical issues. But as president of the SPC, I think I’m going to have to comment on some of the wider issues, which from a techie, lawyer point of view, does take you out of your comfort zone.”
It’s a disarmingly frank observation, but Buchanan seems perfectly at ease talking about those wider issues when asked about his main priorities as president.
One of which is of course responding to this March’s Budget announcement. He accepted the two-year presidency at the start of the year, before George Osborne turned pensions on its head.
The SPC’s chairman, Sir James Hodge, got in touch to tell Buchanan the good news. “He sent me an e-mail at 7am on New Year’s Day, which for a Scottish person, I thought…!”
Fact file: Duncan Buchanan
Lives: Wimbledon, London
Educated: Reigate Grammar School, Cardiff University
First job: Pushing trolleys at Safeway’s. “It was a Saturday job, great fun.”
Current role: Partner, Hogan Lovell’s, in the pensions department
Past roles: Qualified 1990, Fox Williams-1990-1992; Rowe & Maw 1992-1997, Garretts/Andersen Legal 1997-2002 (appointed partner in 1998), partner, McGrigors 2002-2006 and partner Lovells 2006
Recreation: Has just bought a sailing boat - “It’s 20 years old and it’s my first attempt at skippering”
Family: A wife and two sons
About the Budget, Buchanan says: “I think the most important thing for pensions, in the next 7-8 months, is to sort out the guidance guarantee. We’ve got to make that work, and we’ve got such a short time period to make it work in.”
He predicts about a million people will seek guidance in April next year, comprising people who have taken their lump sum since the March budget and are interested in drawdown, and also the over-55s, who will be interested in finding out their new options.
“That is a massive burden,” says Buchanan. “What you are actually going to get in your guidance interview is going to be very limited. I expect it will tell you: ‘This is how long we think you’re going to live.’ I think it should tell you if you went to buy an annuity now, what would it buy you? And then, if you chose to draw down, what would you get?”
“There’s going to be some dodgy dealers out there, looking to encourage people to draw their benefits”
He also worries that detailed tax advice, so dependent on a person’s individual circumstances, may not be covered in the session.
Buchanan is concerned about another, less talked-about demographic who will retire under the new rules. “There is the Lamborghini person, but then I think a bigger concern for the SPC is the people who are fearful of touching their retirement pot because it’s got to last them.
“My mother would do it: she’d say ‘Oh, that’s for my old, old age, I don’t know when I’m going to need it, so I’ll leave it there and won’t draw on it and make myself live on the state pension.’”
“There’s going to be some dodgy dealers out there, looking to encourage people to draw their benefits. And actually, probably the best place to keep it is in your pension fund,” he concludes.
The Budget also poses a huge challenge for defined contribution (DC) lifestyle investment strategies, which are geared towards people buying annuities. Buchanan doesn’t mince his words on this point: “The concept of lifestyling has got to change… It’s most unlikely that people are going to annuitise. Instead, they’re going to be doing things like drawdown, or maybe buying deferred annuities that kick in at age 85, for instance.”
“I think in the next two years we’re going to see a lot of development of investment products”, he predicts. “DC has always been the poor relation, but some of these DC plans now have assets of over £100m and they’re trust-based.
Duncan Buchanan, pictured at Hogan Lovells’ London office
“If you were starting from scratch with a DC trust-based scheme and it had assets of over £100m, would you really say, ‘What we’ll do is give each member a choice of how to invest their pot. We’ll give them a range of options.’ Or would you say, ‘Actually, we’ll treat it more like a DB scheme where we have a pot of money – we’re the trustees, trust us, we’ll invest it.’ You can see some of defined ambition [going in that direction.]”
The SPC will be looking at defined ambition under Buchanan’s leadership. “We are very keen to play a role in defined ambition. It’ll be interesting to see how it develops in the coming years. Whether there’ll be anything on defined ambition in the Queen’s Speech.”
He is agnostic on whether or not the Budget will help or hinder the defined ambition agenda. “I think it depends on the employer.
“Some of my larger employers are very paternalistic and they do want to provide people with a decent pension to allow them to retire in a dignified way. But they recognise that cost has been piled on them over the years with each change in legislation.”
“We are very keen to play a role in defined ambition”
The SPC has written some excellent papers in the past, including 2012’s rallying ‘Vision 2020’ paper, which called on the government to overhaul its valuation methodology to help pension schemes de-risk. Are they working on any new research at present?
“Prior to the last general election, the SPC put together a paper called ‘Priorities for a New Government’, to say, ‘These are the main issues on pensions that you should be concerned about.’
“I think the plan is to dust it down and revamp it for the next general election in May,” reveals Buchanan.
Like the rest of the pensions industry, Buchanan and the SPC clearly have a busy time ahead over the next two years. At the centre of a rapidly transforming industry, he’s come a long way from his early days waiting for faxes to arrive.