On Wednesday (10th December) I will be speaking at a Prospect conference which asks “what is the future of Pensions” in the UK.
It is great to see journalists from outside the pension industry picking up on the issues we struggle with. By way of proving my point , here is the pre-amble
- The 2014 Budget heralded a complete overhaul for the pensions industry. This will see a reduction in the tax rules around pensions and a relaxation of the constraints of the access that savers will have to their personal pension pots, meaning that annuities will no longer be the only practical choice for most people looking to secure an income in retirement.
- This will have huge significance for savers and the pensions industry, which has always been a vast repository of savings and wealth, which has in turn been used to make investments in business and industry.
- From savers’ perspectives, critics have been warning for a while that very poor income levels from annuities—thanks to ultra-low interest rates—and the fact that the rules compel most people to use their pension fund to buy an annuity add up to a fatal combination.
- Savers are increasingly aware that they are being corralled into purchasing a less than attractive product that they will be stuck with for the rest of their lives. The danger is that they simply give up on pension saving entirely, unless the pensions industry is able to come up with new and innovative products.
- Growing flexibility and choice for pensioners holds out the prospect of more satisfactory outcomes for more people—but only at the cost of making the market more complex for them to understand and navigate.
- Exercising choice requires knowing how to make the necessary comparisons. So any gains made from greater diversity will only be secured if people are helped to understand their options. Will the government’s pledge for right to advice meet this need?
- There is much still to do in the pension system – including addressing the fractured nature of the market. The Government perceives the current arrangement as failing to capture any economies of scale for savers and takes the view that a far bigger group of competent trustees is required to run the schemes than can reasonably be found. The perception is that fewer schemes run by higher calibre trustees would do a great deal to help the situation.
- Following the 2014 pensions reforms, the industry, government and savers will need to contend with a number of unanswered questions: what is the likelihood that a proportion of savers will mismanage their pensions, leaving them with a reduced or non-existent income? What role will state pensions play in the new scheme of things? What does the future hold in store for the annuities market?
Here are the speakers
- Andy Davis, Associate Finance Editor, Prospect (chair)
- Teresa Fritz, Member, FCA Consumer Panel (principal speaker)
- Scott Dakers, Head of Product Solutions, Aberdeen Asset Management
- John Godfrey, Group Director of Communications, L&G
- Chris Curry, Research Director, Pensions Policy Institute
- Robin Ellison, Visiting Professor in Pensions Law and Economics at Cass Business School, City University
- Bob Champion, Retirement Product Lead, Old Mutual Wealth
- Jay Elwes, Deputy Editor, Prospect
- Dom Frost, Policy Adviser, CBI
- Richard Graham MP (Con), Chair, All Party Parliamentary Group on Pensions
- Paul Johnson, Director, Institute for Fiscal Studies (IFS)
- James Kelly, Australian Treasury Representative for Europe
- Gregg McClymont MP, (Lab) Shadow Minister for Work and Pensions
- Nigel Mills MP (Con) Member, Work and Pensions Select Committee
- Will Sandbrook, Head of Strategy, National Employment Savings Trust (NEST)
- David Sinclair, Director, International Longevity Centre
- Ben Stafford, Head of Public Affairs, Just Retirement
- Henry Tapper, Director, First Actuarial
- Mike Thornton MP (Lib), Member, Work and Pensions Select Committee
- Graham Vidler, Director of External Affairs, National Association of Pension Funds
And these are the questions we will be discussing
- How can Britain fix its pensions problem?
- What does auto-enrolment mean for the pensions industry?
- If you withdraw from your pot, where should you invest?
- What’s the future of the state pension?
- What examples from overseas are instructive?
Over the next few days, I will blogging on these questions, as a means to focus my thoughts on the day and to get as much feedback as I can on my views.
Please feel free to mail me on henry.tapper@pensionplaypen.com with your thoughts, better still, share them in the comments box.
If you haven’t already registered for this blog , you will need to do so to comment, perhaps now is the time!
The problem is that the general public think that ‘Pensions’ are a particular type of investment. They are not.
As you already know, Henry, a pension plan/scheme is simply a tax-wrapper within which certain types of investments may be held and which, in doing so, can benefit from various tax-breaks. Pretty much in the same way as an ISA or an Offshore Investment Bond or a SEIS or…..all have certain tax-breaks if the investments contained therein meet certain criteria. And all have restrictions on the amount you can add or withdraw and the timing thereof.
It’s that simple.
I recall someone once saying that you could consider a Pension ‘wrapper’ to be like an ISA on steroids. An analogy which I can understand.
But it’s getting that simple message across to Joe Public which is the challenge due to initially having to overcome the problem of mis-informed journalists plastering sensationalist headlines across the media as if pensions were the next big name to be investigated by Operation Yewtree.
The other problem is successive governments’ constant meddling with the pensions regulations. But then again the likes of ISA’s, VCT’s & EIS’s have all witnessed varying degrees of changes to their regs in recent years but I don’t recall any red-top journo’s going to print over that.
I think a potential solution would be to ban journalists from writing about Regulated Investment Products if they don’t carry the relevant professional qualifications and a current Statement of Professional Standing (sound familiar?). It’s too dangerous otherwise and often the content of their articles is to the detriment of the consumer.
The pension freedoms certainly take pensions that way Mark, but research by the IPPR and (seperately ) by Aon, suggests that most people want to replace income in retirement and I think we may see a reversal from the more extreme visions of pension freedoms in the months and years to come!