Something usually turns up at a Pension PlayPen lunch.
Chris’ contention was that when the public was presented with a game changing product like Amazon or Easyjet, the public’s behaviour changes and there is a clamour to deal direct. The casualties are the retailers, the travel agents and high-street stores.
Dis-intermediation occurs because we don’t need advice- just a little guidance which we can act on. If this Freedom to Choose thing is going to work-it’s going to have to work within the constraints of the system. There are only 22,000 advisers- there are 400,000 people reaching 65 next year.
What was unclear to Chris, as it was to all in the back-room of the Counting House, was what such a game changing product looked like.
The pensions landscape at the moment has need of Mr Micawber’s optimism that “something will turn up”, since as the pensions minister has publicly state, the retail options available to retirees from 2015- “cash-out, annuitise or draw-down” hardly constitute the basis for a second pillar pension system.
In the absence of any grand design, the conversation at the table inevitably centred on the delivery of guidance and whether advice was necessary. Interestingly only 10% of us considered advice necessary while 40% felt that Guidance should do.
Regular readers of this blog will know that I see the solution as what the Friends of DC are calling “Target Pension Plans“. To get them we will probably need to calm the headwinds of the Bridge Judgement and get a shove in the right direction from the Queen’s Speech on June 3rd. Then we may be able to define the ambition we can bring to building the killer product that Chris Radford craved.
My feeling is that once an obvious default emerges to replace annuities, the concerns that the table has over guidance and advice, will fall away. The traditional problems of providing affordable advice to the mass-market are predicated on there being no obvious courses of action- only a plethora of sub-optimal choices.
My Eureka moment came when I understood that it is the delivery of a killer product that simplifies advice sufficiently for it to be delivered as guidance. Without a killer product, a default solution, then decision making becomes so awkward, we need an expert to make the decision for us.
But like Mr Micawber, while I have an intimation that something will turn up, I (nor anyone in the room) have any certainty as to what that will be.
It is now up to all of us to make sure we have the Grand Design, the killer product! We’ve got to put a lasting statue on the empty plinth in Trafalgar Square, we’ve got to build something to replace annuities.