A happy result of dissing Michael Johnson’s attacks on pension saving early in the week was that I got a copy of his paper “Put the saver first” direct from the great man.
He calls up the spirit of Ron Sandler– (who I had quite forgotten about)
the three reasons cited by Sandler as to why the industry was failing to serve large portions of the population still hold true today:
the complexity and opacity of many financial services,
the failure of the industry to attract and engage with the majority of lower and middle income consumers,
and the inability of consumers to drive the market
But it is often right and I think I support about 90 of his 104 points. He’s very right about non-disclosure of transaction costs by fund managers, his tax proposals are now partially enacted and it now seems inevitable that higher rate tax relief will be phased out. His attack on salary sacrifice – or at least his call to have its cost properly disclosed, is necessary.
Throughout the paper there is a barely suppressed contempt for the DWP and for welfare. Johnson’s arguments are designed for the Treasury which you suspect is his career destination. Johnson argues that the Pension Regulator, the DWP’s pet pension scheme NEST and the department itself are all unfit for purpose. While the Treasury does not escape criticism (not least for its “spend not save” culture), Johnson implies that pension policy run by the Treasury along his uber-effecient lines, would take us closer to the welfare-free American model on which his vision for Britain is based.
Which is where I part company with Michael and can perhaps offer him some advice.
May the joyful smile of the Pig of Happiness remind you of how much there is to be happy about!
There’s an earnestness in Michael’s approach which misses his central point. Michael wants to “put savers first” and he wants them to have the products they want rather than the products they are “sold”.
But this assumes they know what they want. So behavioural observation leads to the following conclusion
An increasingly flexible working culture, and inconsistent career trajectories, appears to accommodate people’s reluctance to plan ahead. Many perceive that they will be able to work past retirement age, unconcerned by the potential lack of employment opportunities. The consequence of such laissez faire is that people want to have control of their money now, which rules out saving within a pension product.
Well you could equally well argue, using this logic, that paying income tax , VAT and beer duty should be abolished.
What is missing in Michael’s world is a sense of humour. Dare I say it, he should spend some time in the Pension Play Pen where we are learning to laugh at our imperfections , to understand the imperfections of others and to laugh at life’s vicissitudes with childlike insouciance.
People Power is here. Consumers are driving the market in many areas of consumer finance. They are not doing it earnestly, as the Money Advice Service would have them, nor are they learning about money using the clever modelling tools distributed by financial services companies.
Strangely enough, they are learning the financial ropes on Martin Lewis’ www.moneysavingexpert.com . I have been spending some of the past two months finding a way to make expert advice accessible to some of the 1.2m employers who will need to help their staff into pension plans over the next five years.
We are taking our cue from the man who has wowed 11.7m people into getting a weekly financial e-mail from him. (no failure “to attract to attract and engage with the majority of lower- and middle-income consumers” -there!).
And we are determined that we will find a way to make it as easy and fun for those 1.2m to make pensions available to their staff as it is for us to learn and save with the master.
People Power has arrived. It arrived in a most unexpected way. It has nothing to do with the RDR, or TPR or FSA or DWP . It has everything to do with the refreshing common sense, honesty and good humour of Martin Lewis and his team.
Michael, take note!
- Pensions dead by 2050 – taking the Michael? (henrytapper.com)
- Need or greed? – how fragile the case for pension tax relief (henrytapper.com)
- Private sector would have to opt out of pensions under plan (independent.ie)
- All change on pensions – a positive outlook for 2013! (henrytapper.com)
- Pensions will not exist by 2050, expert warns (telegraph.co.uk)
- Why the DC “game is up” for the active fund managers (henrytapper.com)