Adrian Boulding has written an excellent article about the new cost and charges disclosures. I will quote only the conclusion and urge you read the rest of it here.
Can we hope to obtain full investment charges data onto a pensions dashboard in a format that is understandable to the majority of savers? No!
Can we obtain disclosure to the point that an adviser can make sense of it all? Maybe.
Being realistic, however, advisers are as time-poor as their clients are demanding. So I am left with one last hope, which is that we can obtain asset management disclosure to the level that specialist adviser firms – the ones that service financial advisers, trustees and IGCs – can make sense of all this data and pass on their findings.
Adrian’s implicit admission is that people will not be able to work out the impact of costs and charges on the outcomes of their savings policies. I disagree.
Let me give you an example;
Supposing I was to look at the value of my pension policy I’ve saved into for the last few years and discover it was worth £100,000. I might be happy, I might be sad , but most likely I’d be mystified. There is no way of knowing if I’ve had a good deal from contributing the money I have.
Let’s suppose that I was given another figure – a theoretical figure – £150,000. This is the amount I would have had from that pension policy if I hadn’t had to pay the butcher, the baker and the candlestick maker for managing my money.
I don’t think I’d have to be a genius to work out that the cost of my policy was £50,000.
Now let’s suppose that I was allowed to know the amount that was contributed to my policy over the years. Money might have arrived from my personal contributions, from what my employer paid, from HMRC as tax relief and even from the DWP (if I used the policy to contract out of SERPS/S2P. Let’s say my total contributions had been £80,000.
In a very simple analysis of what has happened to my policy, I’ve got back £20,000 more than I put in and the pensions industry has had £50,000. The value of my policy has been £20K and the money I’ve paid to get it has been £50k.
Such an analysis reflects badly on all the parties involved in the running of the policy. Anyone looking at these numbers would be hard pushed to justify the “intermediaries” between him/her and the money getting 2.5 times the return that he/she did.
If it had been the other way round, and the individual got £50,000 value and the intermediaries got £20,000, then the equation might look right.
The trouble is , that ordinary people are not able to get this simple information in their hands. I think they should. Not only do I think they should be able to get proper information about the total costs they have incurred , but I think they should be told the total amount that has been contributed and the value those contributions have grown to today. What is more, the Government agree.
How GDPR help us
The Data Protection Act 2018 (which incorporates GDPR) gives us all the right to see the data that is held by others on us, and to see it in machine-readable format – that means in a way that a computer can process the information (data) to make sense of it.
What that means is that since May of this year, you and I can get all the data needed to see how much we’ve contributed, what has been taken by intermediaries and what we have left. We have the right to this information, but not yet the means to make sense of it.
What I am intending to do with AgeWage, my new venture, is to get this information, make sense of it and to present back to people the value they have got for their money so they can make sense of what has happened to their savings since they made them.
Whether that makes AgeWage what Adrian calls “a specialist adviser firm”, I doubt. Whether this makes AgeWage a very valuable venture, I have no doubt. AgeWage will be the first organisation to tell people the value they have got for the money they have spent on pensions. There is a great deal of “value” in that!