None of my business

I went to a meeting last week at the end of which the pension manager I was speaking with asked “I can see why this matters but why are you bothering?”.

A very sensible question as it happened since the commercial advantage to my firm was not obvious and the pitch I was making a difficult one.

I thought of rolling out a platitude such as “thought leadership” but instead shrugged and replied that I thought “it’s dirty business but someone’s got to do it”- the alternative title for this blog.

This blog’s about raising the awkward issues we wouldn’t discuss in day-to-day work – that’s why the “views expressed” disclaimer distances my thoughts from my professional responsibility as a Director of First Actuarial.

Nonetheless, one of the reasons I joined First Actuarial was to tilt at the windmills the industry felt weren’t worth the bother and to make our business the improvement of industry practice which for whatever reason  might not be the best.

First Actuarial was born out of the rectification process of the pension mis-selling scandal of the 1990s and there remains within our organisation a proper outrage when the lot of the individual is put second to the profits of a corporation or partnership.

On Monday I’m going to have to justify to 120 people in the heart of the City why I and my colleague Jenny Davidson, are worth a couple of hours of the time of some senior pensions people. To be frank, plenty of the people in the room will be technically more familiar with annuities than we are and it could be argued that establishing a way forward “at retirement” is none of our business.

I’m not going to spoil it for the readers of this blog who are planning to go, or even for those of you who aren’t, by rehearsing our arguments. If you’ve been reading my blog for a while you’ll be aware of my frustration that hundreds of thousands of people in the UK will cash in their annuities this year and end up with pensions substantially lower than they could have.

To quote Martin Lewis on www.moneysavingexpert.com

Ivor Pension, a 65 year old man with a pension pot worth £100,000, could typically get offered £6,000 a year when buying an annuity from his normal pension provider if it’s the worst available. However, by going for the best open market option, he could buy an annual income of £6,900.

That’s a difference of £900 a year, or a chunky £22,500 more income if he lives for 25 years after retirement.

Many will simply not  get the annuities they are entitled to as a result of not using the OMO, or not presenting the medical evidence that gets them an enhanced annuity or not taking advantage of an alternative approach that might suit them better . They will have to live with their mistake for years to come and experience tells us that at some point they will either discover, or be told that they have taken a rubbish decision. Typically by not taking a decision and allowing themselves to be “clubbed like a seal”.

When this revelation becomes clear and the resulting financial loss calculated, the chances are that a canny lawyer will not be far away. The issue will be whether the mistake was deliberate or resulted from wrongful advice or an absence of advice (and fiduciary care). In any event , the finger of blame will be pointed and we will be into another round of pension mis-selling.

Which is my argument for why this is our business. No one is going to thank the pension industry for getting things right but there will be plenty who will blame us for getting it wrong. If we all agree it is someone else’s business, we may find it is nobody’s business.

When the music stops, the courts may take a different view.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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