I’ll find myself , at the beginning of the day, on a panel charged by Jon Cudby with John Moret and other financial services dignitaries discussing the New Retirement Freedoms
I’ll find myself, at the end of the day, at the Conservative Party Conference on a panel chaired by Andy Davis, Associate Editor, Finance for Prospect, with Harriett Baldwin MP, Economic Secretary to the Treasury, Jeremy Quin MP, Member of the Work and Pensions Select Committee and Carlton Hood, Customer Director, Old Mutual Wealth
“How can government ensure people get the pensions advice they need?”
More specifically
- Are we sure there is an advice gap and if so how big do we think it is?
- Does everyone need advice?
- What defines someone who does need it?
- Is generalised guidance enough or do most people need regulated advice?
- What is the best way to deliver pensions advice to people saving for or entering retirement?
- Who should deliver it?
- Does it have to be face-to-face?
- How early should the process begin – should it be early in people’s working lives?
- Should advice be mandatory in certain circumstances?
- What protections should exist for people who insist on ignoring professional advice?
- What is standing in the way of a market-based solution to the advice gap?
This is how Prospect Magazine- who are hosting the event- view the question.
“If, a couple of years ago, you had found yourself standing next to someone at a party who said they were a pension advisor, you would probably have been less than overjoyed. A brief exchange of stilted pleasantries is about the best outcome either of you could have expected.
Things would be rather different if you bumped into the same advisor again this summer: rarely have so many people spent as much time talking about one of the most complex and important financial issues that any of us will face—how to pay our way in the world once we retire; and how can we make sure we can access clear and reliable advice?
An asteroid has struck Planet Pension.
Until the Budget in March 2014, the rules that govern pension saving had developed by a process of sedimentation: year after year governments and regulators deposited layer upon layer of minor changes and tweaks on top of the last, creating a complex landscape that very few people could navigate with any confidence.
Then came a bolt from the blue.
Suddenly, the longstanding obligation on all but the wealthiest retirees to turn their pension fund into a guaranteed income for life via an annuity was scrapped. Instead, we were promised freedom, choice and flexibility.
Robin Keyte, a leading financial planner based in the West Country said that the promise of greater freedom and flexibility in how we can manage our money, along with the move to make undrawn funds inheritable without steep tax charges, is making people he speaks to more willing to save for their retirement.
This supports the notion that the previous regime had come to appear so restrictive and the returns available so unappetising that it had become a disincentive to save.
And beyond that, there is simply the beneficial effect of the government’s bolt from the blue— suddenly people are thinking and talking about pensions as almost never before.
“I do think that all the debate and coverage has made people think more positively about pensions and that has to be a good thing in the long term,”
said Chris Curry, Director of the Pensions Policy Institute.
“If they can see pensions in a more positive light, they must be more likely to want to be part of the system than to avoid them or not to trust them.”
While pension reform is welcome they have created a much more complex set of choices for people who are reaching retirement and many of them risk making unwise or poorly informed decisions that could have far-reaching consequences for them if they don’t have sufficient access to expert advice, and could also have a major impact on the state’s finances if too many of them run out of money part- way through their retirement years”.
And for the rest of the day, I’ll be with my colleagues working out how we can convince the industry and Government, that what people want – to quote Paul Lewis, at recent FT events is
“a product that delivers at low-cost with certainty income for the rest of their lives with some flexibility.
There is a need for advice, a need for guidance and there’s a need for somewhere to invest our pension pot.
And that’s where the debate needs to go!
Tuesday 06th October 2015 17:45-19:00
Location:
Stanley Suite
The Midland Hotel (Secure Zone) 16 Peter Street
Manchester M60 2DS
Social Media
@prospect_uk @andy_davis01 @HBaldwinMP @OMWealthUK #OMWadvice #cpc15
Nearest stations: Manchester Oxford Road, Manchester Victoria, Deansgate
Upon arrival: please report to the main reception as you enter the building and ask to be directed to the Stanley Suite.
A key role government can play is to ensure there are some simple products available that are easily understood and do not require professional, regulated advice to understand them. An alternative is to define some quality standards and apply them to products – then people could confidently buy products with the “kitemark” confident that it was reasonable and they had some protection without every single individual having to receive advice…
Alan Chaplin
First Actuarial LLP
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Re: the barriers to the market devising a solution which offers advice to consumers: the largest barrier is regulation and the requirement to provide inordinate amounts of supporting evidence when providing advice. I understand how we got to where we are now with regulation, but advisers are no longer milkmen in the morning, car salesmen in the afternoon and pension sellers in the evening. We are now highly qualified, and we now know what we are doing. And yet we are still regulated as though we have left our horses outside and need our briefcases inspected for contraband. What consumers do not want or need is what they are getting now:- reams of illustrations, projections and literary works of art called suitability letters, and a focus on justification of the advisers actions rather than explanations of how it works for the consumer. Adviser firms are paying through the nose for other advisers sins via FSCS, via inflated PI premiums, and are having to spend inordinate amounts of time, money and resources covering our butts. These costs get passed on to the consumer in the form of higher fees. We are not merchant bankers trying to swizzle corporate clients with credit swap interest loans, we are not LIBOR riggers trying to make millions, we are not city traders, we are honest good people trying to help other honest good people arrive at the right choice for them. BUT we need paying. We are professionals and we need paying for what we do. Alan Chaplin is both right and wrong about kitemarked products, because actually it is not all about cost when investing, it is also about choosing the right product and it is also about having the right investment strategy. And it is about having an appreciation of how the clients circumstances, beliefs and needs can change over the years. For people with hardly any money saved in a pension they will possibly be best served avoiding the costs of advice and buying a kitemark product. For those with hardly any money at all in pensions or anywhere else this is an academic argument and such individuals won’t really suffer or benefit from their decisions either way. In this instance a simple discussion on the taxation of withdrawals from such small pots would be more than sufficient. But if it were possible for advisers to just give advice and be trusted (rather than having to back everything up with reams and reams of paperwork) then maybe we could charge far less and then more people with smaller pots could afford cost effective advice. I know I am wasting my time saying this but it does not change my view nor make it any less valid just because no one listens. The debate you are about to engage in is full of pertinent relevant questions, but sadly the people having that discussion are devoid of recent experience at the coal face. Shame really, it seems rather like the Granthams having a discussion of what’s best for the servants in Downton Abbey now that domestic service is coming to an end.