The decision of the FCA to enforce a section 166 order on Wonga demonstrates a new intent to get to grips with bad behaviour in the financial community which has got to be good news for us in pensions.
I was at a meeting yesterday with a group of academics who were wondering why we still don’t know how much we pay for our pensions. I gave them the answer, because we don’t require an answer. Let’s hope as a result of the work being done by the FCA and DWP on transparency of charges, we will finally get some numbers on fees and costs.
On a less optimistic note, the information that we can give the market through research is of no use if those we provide the research to, have no inclination to use it.
Many of those who took out a Wonga loan had access to better forms of finance and information was available through CABs, MAS and the internet which could have saved them from themselves.
But the context of the decision these people took prevented good decision making.
That is not me being liberal and absolving people from the consequences of their own decisions, it is simply a fact that people take bad decisions out of ignorance, laziness or panic which they would not have taken had they been in a better place.
For all the research on decision-making that is going on today, I see very little on the context of the decision.
I know that I take my best financial decisions when I am alert and at work. If I put myself in a work context, I will behave more professionally and with better effect than if I do the work in the evening with a glass of wine in my hand.
This is of critical importance to those considering the Guidance Guarantee. I have yet to see any guidance on “context” for decision making but – to give this a first stab – I can offer fivc simple do’s and dont’s when taking a decision on your financial future relating to your pension pot
Take time on your decision
Ensure you consider those who are affected by your decision, including family, debtors and employers
Take as much advice as you possibly can
Use the internet – especially sites such as money saving expert – where you can ask questions.
Keep a smile on your face
Rush your decision
Sign anything or press a irretrievable “send” buttons when you are tired , drunk or feeling depressed.
Take decisions on your own
Do anything that you suspect may be illegal.
I don’t know if any of this can be regarded as financial advice but I suspect that the majority of the decisions taken by those who took out Wonga loans , made decisions in the wrong context.
One of the reasons we advocate financial education at work is that it encourages better decision making.
Pensions are boring- work is boring – there is a natural synergy there.
“Context” is also a key reason for companies to introduce workplace saving into credit unions. See previous blog.