SHOW ME THE MONEY! What’s going to happen our auto-enrolment savings?

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L&G are Investing in Salford, where First Actuarial have an office

People want to know what happens to the money they invest and we are terrible about explaining where their money ends up. This blog talks about how we can make pension investment as vivid and real as the picture above.

Over the next 35 years, the mount we’ve saved into workplace pensions is set to grow from around £700 to £3,500bn. These numbers come from a graph given me at a recent Prospect round table by Britain’s biggest pensions savings manager- Legal & General.

Yesterday I was answering questions at an accountant’s conference in Solihull and the question came up – what’s going to happen to all this money. A similar question had come up the day before at a meeting in Froome in Somerset.

People want an answer to this question, not from an academic point of view, but because they are thinking of their own savings. They don’t think in terms of Billions but they do know they are saving thousands, maybe hundreds of thousands and they want some way to know what’s happening to their money – after all it is now “their money” – it doesn’t disappear into an annuity.

If we are to win the hearts and minds of ordinary people like those I met in Solihull and Froome, we need to have better answers than “it gets invested in what we call a lifestyle fund”. Every time that I hear the mechanical approach of “shifting money from growth to income sensitive assets” a little kitten dies. I saw it happen in Froome when a well meaning pensions expert this out as if people understood or cared. They don’t.


 

Real freedom right now.

The question was , is and will be – what are fund managers doing to help people who want income right now – those in later years.Here is what Nigel Wilson, CEO of L&G told us.

He’s identified a chronic shortage of UK housing , especially suitable housing for those he calls “last time buyers”. A third of retirees want to move and “rightsize” where they live. They want the right kind of place close to family, friends and facilities. And if they move, housing stock will be freed up for younger families.

So what is L&G doing about it?

For those who want to stay in the family home, they’ve started selling lifetime mortgages which provide cash to the householder so long as they live. The over 60s in the UK have over £1,300,000,000 of equity in their properties. Having opened this product in March, L&G are now seeing £10m of new applications each week


 

“Slow money” for the future

For those of us with many years ahead of us, the question is not about immediate but future needs. The people of Solihull and Froome want more than a stock answer with the word “lifestyle” in it. They want to know where the money is going. Individual savings are the basis of all institutional investment and we can use digital technology to pinpoint where a saver’s assets are invested. And their money can be invested in the UK economy to create local jobs and growth.

Nigel Wilson gave us a map showing investments in Methodist Care Homes, investments in brownfield sites in Liverpool, Plymouth, Canning Town, Salford and Wakefield, it shows investments in Southampton University, an Aberdeen international business park and in Royal Liverpool University Hospital. In all £15bn – almost twice the total amount saved in L&G funds through auto-enrolment is invested by L&G in long term direct investment.

Let’s not ruin this by selling this to people as “infrastructure funds”, let’s keep talking of direct investments into these kind of projects.

 

Winning hearts and minds

I want to know where my money with Legal and General is invested. I want Digital Data services to pinpoint the projects that the default investment fund of the First Actuarial Workplace Pension Savings Plan invests into.

I don’t want woolly nonsense about global equity trackers, annuity protection funds.

Show me the money!

I’m a very lucky lad.

Dr Nigel Wilson and I are going to meet in his offices and he’s going to tell me just what he intends to do to win my heart and my mind.

I am lucky because I will be one of only a handful of policyholders who will have a chance to directly influence that conversation.

But there are other ways to get to the boss. Legal and General, like all the  insurers, now have an independent governance committee, charged with making sure that policyholders like you and me get value for money from their savings. I would like the scope of the IGC’s activities to be extended so that the annual Chairman’s report included a statement on how money is invested. In time, I would like as an individual saver, to know where my money is invested.

Because it makes me feel very good to know that my money is invested in things that have a great future, like those direct investments listed above.

Of course I’m interested to know that my fund is properly tailored to my lifestyle and to know that it has low costs and charges and that it’s diversified to reduce risk but…most of all, I want an answer to the question of the business owner in Froome and the accountant in Solihull

“what’s going to happen to my auto-enrolment money?”

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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