Until quite recently, the main sources of financial advice for small businesses were the accountant and the bank manager.
The BOE’s Andy Haldane’s comments about the complexity of pensions look back to a day when these intermediaries were trusted
“The local branch manager was a pillar of the local community, serving as part financial counsellor, part psychological counsellor, service was customised and personalised”.
“Without wishing to be misty-eyed about this model, which was far from perfect, what it did deliver was repeated interactions with customers. This imbued banking with personalised trust, just like doctors and hairdressers.”
But the myopic Mainwaring and the avuncular “Arthur” are no longer running the Walmington Upon Sea branch. Indeed , if Mickey Clarke’s WUPT testimony’s anything to go by, there is no bank in Walmington or thousands of other small towns in Britain;- certainly not a bank dispensing the kind of advice needed by the 1.7m small businesses staging auto-enrolment and in search of a pension.
Which leaves the accountant who now regards giving pension advice as akin to handling radioactive waste. In the complex game of pass the parcel which is how the decision on choosing a workplace pension is seen, the simplest thing is to whisper “NEST”.
Anyone who has followed the comments of Charlotte Clark ,DWP’s head of strategy, will know that she has stated to a DWP Select Committee that “NEST is a safe harbour product”. If this is indeed the case, then accountants the country over can breathe a sigh of relief, the need for pension advice has been nullified, we can return to a world of mono-provision last seen with the introduction of SERPS in 1978.
Sadly for the hard pressed accountant, happily for the consumer, NEST is not the only fruit and in the auto-enrolment garden many flowers bloom. Some of these flowers may turn out to be bindweed (which is how the Pensions Regulator regards some small master trusts) but the diversity of our workplace pensions market demands more than “any colour so long as its NEST”.
We have then a multitude of workplace pensions, a captive purchasing public but no-one to help Andy Haldane to understand what a pension actually does.
I was accosted by someone this morning who asked me what I considered the five things the public knew least about pensions. My response, taken off the cuff and in no particular order was
“How much they cost, where the money goes, how to check progress, what to pay into them and last of all – who to turn to to get answers to these questions”.
Though we pay ourselves a lot of money to think clever thoughts about default strategies and decumulation options, we have not come up with simple answers to these simple questions.
What is clear is that Andy Haldane is not alone. I spent two days at Accountex, a trade fair for accountants and payroll and as soon as word got round that we were providing a cheap and simple service for employers choosing a workplace pension, we were mobbed. Accountants are desperate not to become the new pension intermediary and so are those in payroll to whom accountants delegate auto-enrolment implementation.
These “business advisers’ are – whether we like it or not -the new pension intermediaries and they are neither expert or interested in being expert about pensions. For them, the most important attribute of a pension is that it takes up as little of their time as possible and with some payroll bureaux anticipating the numbers of auto-enrolment payrolls they’ll be running in thousands, their priorities come as no surprise.
What of the IFA? By and large the IFA is nowhere to be seen, a bit like commission.