Spending time in Liverpool this week has given me the chance of spending time with clients, fellow advisers and those who market the products our clients use. The NAPF Conference is a time when you can look at what you are doing , compare it with your peers and explain what you want to do and how you want to do it.
Most of the conversations I have had have came down to one question “what do we mean by good?”. Specifically, what are good outcomes for all concerned with the shift in the tectonic plates of UK pension provision caused by this seismic explosion elsewhere (auto-enrolment).
The analogy (literary critics call it a conceit) can be extended. If auto-enrolment is the underwater eruption , then the resulting Tsunami is the terrifying wrecking force that sweeps away the vulnerable and unprepared. Steve Webb spoke of naming and shaming poor quality pensions into which people are enrolled. I suspect that given a free run, he and Gregg McClymont would be legislating on what makes for “good” and ensuring that the Qualifying rules were strengthened to make sure there are no bad schemes.
Those with the foresight to get to the high ground or to build with solid foundation may be inconvenienced but will ultimately prosper. Those who don’t will be swept away.
Many pension advisers have struggled to work out “what good means”. But it is not hard to work out what makes for good pension outcomes. The essential ingredients to the cake mix are large payments into pension plans, low charges, sensible investments , efficient means of paying the income out and solid administration.
These are the things that advisers should concentrate on. If people believe that their money is being invested soundly in properly administered savings plans that convert to give them decent retirement income, they will not take the trouble to put two fingers up to auto-enrolment and opt-out. A few of them may get quite interested and want to manage their own investments, some will pay more than the minimum they are required to pay but the vast majority of people will do what everyone else seems to be doing which I suspect will be to use the default contribution scale, the default investment fund and the default “at retirement” options.
Which means that if advisers can get these things right, they have done “good” for most people and served their client’s interests.
In short, these advisers have been worth their salt and should have no trouble getting their bills paid.
There is so much to be done to get companies to the higher ground and to build them sound retirement structures. I’m sure that advisers like me will be kept very busy over the next five years of staging and beyond.
I think of our (First Actuarial’s work) as dividing into three broad areas
- Making auto-enrolment work
- Making the most of the money spent
- Helping people get it.
If you are a payroll manager or if you are managing corporate risk, you want to know that auto-enrolment will work. If it works – good, if it doesn’t bad looks like as much as a £10k per day fine. My job as an adviser is to make the installation operation of auto-enrolment flawless.
If you are a pensions manager or involved in the procurement of staff benefits, you will want to know that the contributions you have to pay under auto-enrolment convert to the best possible pension and that staff are comfortable with the investment of their payroll deductions. You also want to know that there’s a reasonable chance that the retirement benefits that these workplace plans provide are sufficient, together with those from the state and private savings to get people to retire when they’re ready.
If you are a member of one of these plans, then you want to know what is the point, you want to know that the people managing the plans are trustworthy and that care has been taken to make the plans as effective as possible. You want access to information when its needed in ways that suit you (primarily on-line) you may want someone at the end of a telephone line to answer your questions, occasionally you may even need to talk with someone face to face.
Advisers can help companies get these things sorted. They may already be in place but the chances are there’s a gap between what’s been done and what we can properly call “good”. Managing that gap down will require skill. Will it mean a renovation or will a demolition and re-build be required?
I’m confident that if the eye is on ball, advisers will have a role in the staging and management of the pension plans of the millions entering the pension system (as well as those who are already in). But the eye has to be on the ball. Too much time has been wasted on fripperies such as work site marketing, corporate wrap and flexible benefits and too little on making sure that the core retirement benefits are maximised.
For the politicians, the Webbs and the McClymonts, the success of auto-enrolment is measured by the acceptance or rejection of the plans offered. Poor plans will lead to rejection and resentment, good plans will lead to the virtuous circles that greater retirement bring
- Greater freedom in later years
- Sensible behaviour by those in work
- Lower financial strain on future generations
Coming back from Liverpool, I was , as I always am, filled with a new sense of purpose to make pensions good.
For the first time in a long time, I felt we were moving as one in this.
- Why I support Labour’s attack on pension charges (henrytapper.com)
- What Steve Webb must do now. (henrytapper.com)
- NAPF Conference Report (from our man not on the spot) (henrytapper.com)
- Getting CEO’s and Chairmen “comfortably” relaxed about pensions. (henrytapper.com)
- How will employers chose their pension plans? (henrytapper.com)
- Half of SME owners have no pension plan (xlntelecom.co.uk)
- Tenth unsure of pension plans – Confused.com (confused.com)
- Workers warned over ‘rip-off’ pensions – Confused.com (confused.com)
- Pension saving drops to record low – Confused.com (confused.com)
- Auto-enrolment;- the story so far (henrytapper.com)