I’m pleased to see the FCA publishing a paper on the particular problems older people have with financial services, I haven’t read it all , only the summary (which I can summarise as the paper does)!
The summary rightly points out that as we get older we get testier, less patient , less attentive and more vulnerable to poor decision making. I discover that as a 55 year old, I am in the FCA’s sites as an older worker. I have to admit to some poor decision making; spending time in futile conversations about financial empowerment for the old being high on that list.
Elderly people in this country – what this paper refers to as the “65, to 75” and the “75s to 85s” differ only from younger oldies like me in decreasing cogitative faculties. I see no evidence that they worry less about money , nor that they are less able to take decisions, they just seem to take worse decisions.
We curse our elderly with financial decisions that they do not want to make. At one extreme, the elderly are vulnerable to scams and at the other end, they just make mistakes (I have written lately about King Lear and the mistakes he made with property).
We are exponentially increasing the problems for older people by asking them to manage their financial affairs through investment vehicles which become increasingly tedious to operate. We are now reaching that stage in the maturity of SIPPs where we can see just how helpful they are to the elderly.
I would welcome an FCA study into how well mature SIPPs are meeting the needs of those in their 80s, whether they are being controlled by younger generations as a source of inherited wealth, whether they have diminished through badly managed drawdowns (pound cost ravaging) or whether they are now meeting the expenditure needs of their owners.
My guess is that the self-invested personal pension is the last thing that someone whose mental faculties are declining, wants or needs to manage.
Which begs the question, why is so much of FCA policy – at least that relating to Retirement Outcomes, ignoring the messages of this paper?
We have, since early days, recognised that what gives elderly people comfort is the certainty of budgeting around an income. It is what they have had to do throughout their working life. Assuming that we can budget from sluicing a capital reservoir is a dangerous assumption. nobody has yet worked out how to do this – even the experts.
So instead of giving people a couple of hundred thousand pounds at state retirement age and telling them to get on with it, we give them a weekly wage of up to £160 p.w. and people love it – it is their state pension and it is real.
If the FCA can learn anything from the paper they have commissioned, I hope it is that the older we get, the less we value the pension freedoms and the more they want a wage for life. They should leave the glass towers of Canary Wharf and walk down to Poplar or Bow or Plaistow or Stratford and talk to elderly people on the street.
For much as I like to see the FCA publishing papers like this, the reality of old age can only properly be understood by spending time with elderly people.
Au contraire. My advising experience teaches me that what the elderly people (the ones that take advice who admittedly are not the public sector – liftetime of DB accrual junkies) really worry about is NOT their day to day income.
What they worry about is preservation of their wealth that they saved for. They don’t like the forecast annuity that shows they will have to live for 17 or 18 years just to get their money back. Annuity may be sensible, but most expect to live to their parent’s age at death – ie less long than they actually do live.
It is true that business could do more to help them, but this is more likely achieved through entrepreneurship – eg metro bank opening hours – than through top down regulation. The FCA paper seems to recognise this.
IS that Charlie Palmer of Financial Ltd? Talking about pensioners preserving their wealth? This would be funny if I was able to forget about all the folk who had their pensions destroyed due to your ‘light touch’ approach to compliance.
IFA’s have responsibilities under the Mental Capacity Act 2005, as do other professionals such as solicitors. In a nutshell, if I judge that an individual has, shall we say, “mental health issues”, I can’t act.
Which is why I pretty much insist that any client in drawdown (which is rarely done in isolation for most retiring “baby boomers” who have a mixture of retirement income streams) sets up a Lasting Power of Attorney (which everyone should probably have anyway). Why so important for drawdown?
Well, the trustees of your “private” pension plan must have someone to take instructions from should the plan holder lose mental capacity – you can envisage situations where income payments could cease if the trustees became aware of problems.