“The instruction manual is missing”
– the first thing my partner said when she opened her new smartphone, I’d kindly donated her for Christmas. I was close to having a Michael Winner moment.
“That’s because you learn how to do it on the phone”
“But how do I get started….?”
For iphones read pensions, at leas for novices. The UX (user experience darling) diverges about 30 seconds into getting started.
Key words; easy, friendly, simple ,fun ,sexy
Key words; hard, jargon, numbers , boring, frustrating.
There are plenty of pension communications firms who are telling us that pensions can be “easy,friendly,simple, fun and sexy” but they’re not. You cannot make pensions easy/friendly….sexy with a picture.
They really don’t lend themselves to Christmas humour, like…
If we let the people who run pensions , loose on Christmas, this is what we’d get.
Thankfully, the people who run our pensions are beginning to see the point of talking the language of the people who spend them.
The truth’s that there’s currently no simple way we can know all we need to know about pensions, to manage our own retirement effectively.
All this stuff about making pensions sexy is fun when you’ve had a few mince pies but it doesn’t help elderly people managing their day to day finances and it doesn’t help those of us planning our retirement to work out where we are compared to where we want to be,
To manage money we need real online information. When we withdraw cash we expect to see our balance and we expect to speak to someone on the phone or check our account online 24/7. The absence of immediate accurate data on our pension account is a major obstacle to self-management of our pensions.
Even if we can get data on one account, there is very little help in aggregating that data with the other key accounts (bank, mortgage ,savings and other sources of income – such as the state and occupational defined benefit schemes.
This is changing, the new platforms such as MoneyHub and LittleBlue are now able to access the data, organise it and present it in a way that makes those with the right skills, capable of “doing it themselves”.
The new skills needed.
The current generation of pensioners and soon to be pensioners are not skilled in digital self service. I’ve just wasted 30 minutes trying to download a plug-in to show that DWP quiz (#fail) and I’m sure I’m not the only 50 something that struggles to organise usernames, passwords and remember the name of the sites and apps I need to manage my money.
Nobody taught us this stuff when we are young and we’re still looking for the instruction manual!
Restoring confidence in pensions
The biggest problem with our pensions is that we don’t think they are “ours”. To find out what we have we have to ask a series of permissions. We need permission to access data from Trustees, insurance companies and even the providers of self invested personal pensions.
We then need permission to act, typically we need to get advice from our adviser or to sign a number of indemnity forms to prevent us being ripped off by scammers.
Finally we need to wait for confirmation of what we’ve done, usually in the form of a letter which typically arrives at the wrong place at the wrong time.
Faced with so many obstacles to taking action, most of us take no action.
Can we put the instructions back in the box?
I worry that the obstacles between us and our money continue to make pensions “other people’s money”. I worry too that the complexity of the rules that surround pensions are making it difficult for this to change.
I know that the Government are worried too. While the primary economic driver for the forthcoming changes to pension taxation are fiscal (the need to put a cap on tax relief), the justification for changes will be that they’ll make pensions understandable.
As with pension freedoms, the Chancellor is pushing at a half-open door. The public’s dis-satisfaction with financial advice matches their dissatisfaction with annuities.
Following the announcements on March 16th (in the Budget), we will hear from Harriet Baldwin, Osborne’s right hand lady, on the outcome of the Financial Advice Market Review.
I think the Treasury sees the two announcements as linked. Together they are hoping to crack the hegemony of the intermediary and put ordinary people back in control of their finances.
Certainly, if ordinary people were able to manage their pension account as they manage their ISA account, the Treasury would be telling itself “job done”. The instruction manual is in the box, or on the phone – or on web chat.
A word of warning
While ISAs have been an outstanding self-service success story, they are not a pensions panacea. The current default investment mechanism for ISAs is cash and I’m quite sure that many people are in cash for retirement from an early age. While I can understand the desire for certainty, I know the capacity of people to measure the opportunity cost of an investment strategy retrospectively.
The “what if” mentality is most obvious these days by reference to property. A big mortgage, properly serviced, will have provided geared returns (at today’s property prices) that trumps any other form of return.
Many advisers will point to the last two paragraphs and ask whether the general public are sufficiently aware of investment risks to make long-term investment decisions.
I am not among these advisers. I reckon that with proper defaults, sound fiduciary governance and a lot of good messaging, we can improve the nation’s personal financial management – whether of credit card debt or pension saving.
My “word of warning” is “believe”. We have to believe in our capacity to restore confidence in pensions. Without self-belief, we will fail.