It’s not hard to spend a billion, not if you’re a nation that knows how to spend but finds it hard to save.
As Osborne found, a generation of planning can be unwound in a minute. Were the tax rules that surrounded the taking of pensions today, the groans of a retiring populace would be louder and perhaps we would not have a conservative majority.
Just as they were the villain of the piece when we “had to buy an annuity”, so insurers are the villains today- this time for failing to help those with retirement savings to use their pensions as bank accounts.
According to Michelle Cracknell, calls to TPAS are up to 80% but most of this increase is TPAS BAU , Pension Wise is not driving new traffic to the lines and the queries are from the pension literate looking for free advice, rather than the guidance needy.
Net outflows, finger pointing and muppet-like behaviour are the characteristics of the first three months of freedoms. Nothing much will change over the summer. Organisations like the Prudential are busy building aggregation platforms and pension payment systems that will arrive at some stage, but for the most part, the insurance company’s approach to freedoms can best be described as “lipstick on a pig”.
It’s easy for the “told you so” merchants to sit smugly on the side-lines, but difficult to find a lasting solution to the unsatisfactory situation that is emerging.
Here are three simple ways we can make things better.
Firstly we can use the workplace as a means to get simple messages across to staff to make the decisions a little easier. If you are a boss, try mailing your over 50s this link and suggesting they watch it on a private browser- or if your software allows, in the lunchbreak, It’s only 3 minutes
Secondly, ask for feedback, if only a mail. Was the video useful? Would it be helpful to get a pensions expert in to give a talk on choices?
Finally, if you’ve got a good response, ask your pension’s adviser if he or she’d like to come in and do a talk around this video to explain what is going on.
I’d offer to pay a fee and to cover their expenses. That way you don’t need to feel beholden to the adviser. As a rule of thumb, you’re able to pay up to £150 (including VAT) for financial education for staff, before the cost is regarded as a taxable benefit. Depending on the number of staff you have, you could justify the fee as a percentage of the total budget you can spend on them- with the carrot of more later if needed.
People are really interested in this stuff. They are desperate for impartial advice on what their options are. They call it advice, your advisor will call it guidance or education, as long as people aren’t being told what to do, be relaxed about this.
If you are a boss, the next 9 months are going to be the time you make the most difference, calming staff down, getting brownie points and hopefully- getting more out of your workforce in return for your investment.
If you are a pensions expert, put your best foot forward. We’ve got a load of good stuff to share with advisers, we’ve curated one presentation to slide share which has a load of slides that you can load up. You can use the video as you like – the embed code’s easy to copy and paste and works in powerpoint. The presentation is here,
I’d like to say that Financial Education will get us out of the current morass, but it won’t. It may keep us afloat but many people are and will behave like muppets and live to regret it. Many people have bought annuities and they had no choice. At least we have the choice now to get pension fit but the answer is not just better education.
The long-term answer to the problem is a default decumulation option. As Steve Webb was saying in his lap of honour, if we can’t come up with a solution for the 60% of us who don’t have the means to run drawdown but have too much in our pots to cash-out, a new choice that isn’t called “annuity” is needed.
For the silent majority of people in their fifties, sixties and seventies with money in DC pensions, the option to transfer into collective schemes that look and feel like pensions schemes as we used to know them, will become increasingly attractive.
I hope Ros is reading this, If you are- please put “CDC regs’ in the “top-priority” box.