We are all worried about the Guidance Guarantee, the content of what will be delivered and the quality of the delivery. We worry for a variety of reasons but mostly we worry that people will not get what they expected and that the burden for delivery will fall on the wrong people in the wrong way.
Ultimately we are worried that rather than restore trust, the Guidance may bring pensions into (further) disrepute. That cannot be allowed to happen. Which is why I and many others are applying our brains and will-power and fingertips!
The two aspects of the problem cannot be split but it helps to consider them separately, if only to understand that the customer’s experience is what this is about.
Measures for success
I am quite clear in my mind that the measure for success is happy customers, if 90% of those who go through the guidance process are satisfied, then overall success may have been achieved but it is how the 10% who are not satisfied are managed that will be most important. It is those 10% that the press will concentrate on.
Granted that there will be dis-satisfied customers, it is the overall endorsement of the enterprise by the majority that will keep the show on the road. The NHS, our schools and other public services are not uniformly admired, but they have become a part of public life which renders them self-perpetuating. This durability is something that the retirement Guidance Guarantee should aspire to.
These four key metrics in the box are the critical ones.
Independence is a measure of intent. There can be no secondary agenda in these meetings. If the signposting on next steps benefits the person providing the guidance the intent is compromised and the meeting will fail. It is hard to imagine any private contractor being trusted to deliver independently.
Scalablility relates not just to numbers , but to the type of demand. Delivering 50% in person is a lot tougher than 90% by Skype. Perhaps the most onerous phrase in George Osborne’s promise was “face to face”. Logistically it is the most challenging aspect of the Guarantee.
Cost-effectiveness in this context means delivery without waste. We know that a £20m budget can be blown on 35,000 people because we have seen it spent- by a UK PLC this year. Using the means of delivery employed in this case suggests that the burden on the public purse, should such an approach be used would be closer to £200m. This is easily affordable- relative to the budgets employed by the DWP to reduce benefit fraud, it is small. Unfortunately this is pure spend for the Treasury- there is no anticipated saving to the revenue in the short term (though in the longer term good decision making, leading through to lower state dependency should be a win for the public purse.
Experience – inevitably there will be some who will call for a new breed of adviser who has no knowledge of the pensions world and will provide fresh , jargon-free, guidance. But we do not have the 6 months to train these people nor do we know where to find them, nor how much we would have to pay them. Whereas there is a large talent bank of people in the financial services industry who know how to do guidance and could be diverted to this task very quickly
The trite answer is that the taxpayer will pay. This is part of a risk-transfer of obligations from the state to the individual and should be considered a transition cost.
Consequently, the impact needs to be spread across all beneficiaries of this process. The transfer of funds into the private sector and specifically the financial services sector suggests a general levy on the financial services community that could include occupational pension schemes (who pay a levy to the PPF) as well as IGCs , commercial Mastertrusts and not for profit trust boards (typically single employer). But the levy must also be on fund managers and deposit takers. Even lenders are net beneficiaries of the new annuity framework.
By diluting the costs over such a wide base , the impact of the Guidance Guarantee can be diluted and its cost apportioned in alignment of long-term interests.
We should consider £20m no more than a primer, sufficient to get the system in place, but not to run it. If we consider the deployment of a nation’s later life personal wealth a matter of national importance, we should not be quibbling over whether the impact of these measures is £20 or £200m. If the £370m we have spent on NEST has meant that we have an intelligible savings system, then it was money well spent.
Where this takes us?
I have said in previous blogs, that this process is going to have to be led by someone with the vision to both imagine and deliver the solution. I know my architect of choice (it is not me). I
It’s becoming clear to me that only a non Governmental Organisation (NGO )can deliver on independence. An NGO is separate from Government but delivers public policy in the public interest.
And that NGO must be experienced, it must be scaleable and it must be cost-effective.
This narrows the field down for me. To my mind there is only one NGO that delivers on all four of the metrics and has a leader capable of taking on this challenge.
On 23rd May we expect to hear from the FCA what their preliminary thoughts and see a “straw-man solution”. It is critical that a leader emerges to take hold of this project and that leader is entrusted with its delivery in this timescale.
For all NEST’s faults- it has delivered. I do not think it could have delivered without the stable management team that has and is delivering.
For all it’s faults and failures , NEST is delivering in a way that the Guidance Guarantee can deliver and if we can find a GG Tim Jones (not Tim Jones!) then we are 75% of the way there. There needs to be an equivalent to Laurence Churchill to organise Government and there needs to be clear and consistent Government Policy (as there has been with Auto-Enrolment).
But as with auto-enrolment and with NEST, the way forward has to be independent, cost-effective, scaleable and build on what we have by way of pensions architecture.
I believe we can build and deliver this for 2015 and pledge my support to any comparable vision to that articulated here.