Most of us know how hard it is to see a Doctor these days, and how easy it is to get medical help online. Most people I know will consult the internet rather before ringing the surgery.
If only we could say the same for pension advice. I am sick of being told that I should seek independent financial advice , every time I want to know about my workplace pension. It’s such a cop-out. Even The Pensions Advisory Service have to trot this line out, as soon as the question “what should I do?” is asked.
If advice is about giving someone a definitive course of action, then I’m all for it. But you won’t get a recommendation from a qualified adviser without his getting to know you through a “full fact find” and after you’ve signed terms of business and a fee agreement
This is all very well when you are making a life changing decision, but what if you just want to have a look at the funds you’ve invested in , or move your pension pots together, why can’t you do a job for yourself on-line without the computer saying “no”?
Throwing the baby out with the bath water
I’m always surprised by the phrase. I’m equally surprised when I’m told that I shouldn’t be comparing one kind of pension with another because I might not spot a guaranteed annuity rate lurking in the bath- or a with-profits guarantee – or some kind of terminal bonus. If I’ve got one of these lovely things coming my way, I think the baby should be shaking its rattle at me, it shouldn’t be hard for these outliers to be flagged.]
Experts tell me that these outliers need an IFA to spot, I say don’t be so silly.
Putting aside the oddities, I’m going to move on to the next reason I’m told i can’t look at my pensions without an IFA. This is because I’d be comparing apples with pears. This is why Money Supermarket, Go Compare and Comparethemarket don’t have a pension comparison site. They have all been warned off because only someone with a degree in pension science can compare one fund with another.
Again babies and bathwater are involved, it seems you can’t put all your babies in the same bath. This is even more silly, I want a big bath for all my babies! The problem is that some bath suppliers are rather less happy about losing their babies than others. Pension Bee run a rather amusing “Robin Hood Index” (google it) which tells you which providers let you take your babies and which insist on you using their bath!
So how do we get to help ourselves with our pensions?
The Government’s big idea is to create a pensions dashboard. The original idea was that there would be lots of independent dashboards which could compete against each other, but right now – we look like we are heading for one big dashboard, a sort of dashboard-NEST,
The trouble is that rather like Pensions Wise (the Government’s pension guidance service) the dashboard won’t tell you what to do, it will just tell you the pension equivalent of how much fuel you’ve got and when you are likely to get to your destination. All the real fun stuff – like “is my pension any good” – is far too difficult for a Government website. When Governments try to nationalise guidance or dashboards, you can be pretty sure they will mess up.
So how could we work out what’s hot and what’s not in our “pension portfolio”. Well the other big idea in the Government’s locker is “value for money” and this is a lot more exciting – not least because the DWP haven’t yet tired to nationalise it. she
The idea behind value for money is that it is just a score, say a score between one and a hundred. The score would allow you to compare baby A with baby B and even allow you to compare the bath and the bathwater. If value for money ratings got off the ground, you’d be able to compare NEST with a QROPS, a SIPP with a Stakeholder, you’d even be able to compare the workplace pension your employer chose, with all the workplace pensions he/she didn’t.
In case this sounds a little utopian, then let me give you some reassurance. Achieving universal value for money ratings only requires two things. A proper measure of value and a proper measure for money. Value can be measured by the outcome of the investment and money is what you pay to get that outcome. An ideal outcome would involve you paying nothing and getting a shed-load more money back than you ever put that, sadly some people are looking forward to lousy outcomes which will cost them a fortune.
What is needed to achieve this very simple scoring system is rather harder to achieve than to explain. No one knows the outcome of their pension saving till the day the money runs out (hopefully when you know longer need your pension). Nobody knows how much you are paying, unless you can get to all the hidden costs and charges your pension providers don’t talk about.
But help is at hand. The price comparison sites are beginning to get excited about pensions because they can see how “value for money” ratings could make pensions as easy to compare as – well baths and bathwater and investments as easy to move around as babies.
If we can put all the pension experts back in their box and silence their silly quibbles about outliers and apples and pears, then we can get on with collecting all the data to compare all the funds and put them into league tables that show us what value they’re giving , what they’re costing and what value we’ll get for our money.
When we’ve managed to do this – and we’re beginning to think we can actually do it – then you, your employer and your colleagues can start helping themselves, precisely as they do when they feel a little poorly.