I got some fierce feedback on yesterday’s blog where I moaned at the lack of progress in helping people convert DC pension pots to a wage for life/salary in retirement/agewage.
Here’s Richard Chilton
There is an implicit assumption in much of this that DC pension funds are the main source of money in retirement. For very many people, they aren’t. They are often just the icing on the cake. There are DB pensions, the state pension, income from property and inherited money or money from downsizing a home. It is difficult to understand the significance of taking some DC money without understanding the overall financial situation.
People taking pension money are also not always retiring. They can be taking it to invest in a way not available within a pension fund.
I sat as a judge yesterday morning for the Money Marketing “best retirement adviser” award and had a number of excellent conversations with top IFAs. Retirement Planning is – for those lucky enough to have such advisers, the art of financial well-being.
In their recent book “A salary in retirement”, Richard Dyson and Evans estimated the value of the state pension to be over £280,000. This beats by a factor of 9 , the value of the average DC pot. If your state pension is worth 9 times your DC pension , then Richard Chilton and Brian G are right, all that workplace DC pensions are – are icing on the cake.
Your workplace pension isn’t the half of it!
But statistics are bald and don’t take us half way there. I had 10 pension pots (mostly workplace derived) and apart from the one with a GAR, they are all now in one pot, managed by LGIM through a Legal and General workplace pension.
There are many like me, what sociologists like to call mass affluent, people who do not become clients of high quality IFAs and need self-help books like Dyson and Evans’. AgeWage will be built around their needs.
But if all financial services aspires to – is to help the “haves”, then it will be failing in any kind of social purpose. If we are serious about democratising the savings culture through auto-enrolment, we must have an expectation that the average working person will – as they have in Australia – come to regard their retirement savings as a key personal asset. As much an asset to be cherished as their house and the inheritance.
This sense of ownership is sadly lacking and it’s what the AgeWage score is trying to do. The score aims to make the money we have saved tangible to the savers. In time, we can hope that workplace pensions will become as important to people’s later life finances as the state pension (and not from dumbing down the state pension). We have to plan on success .
Proper help for the mass of us
Richard Chilton is one of the good buys, he’s a pension expert who gives of his time to help people understand their pension freedoms. There are many like him helping people through Citizens Advice Bureaux and the Money and Pension Service (MAPS). Pension Wise relies on people like Richard.
I hope that they can find ways to be more effective over time as I see much of their experience could be better deployed if they were released from the shackles of guidance and allowed to help people make better decisions as advisers.
The Citizen’s Advice Bureau, the Money Advice Service and The Pensions Advice Service must now be re-risked and de-risked into the guidance model.
MAPS says it is in “listening ” mode , the FCA are consulting on whether to extend their consultation on the impact of FAMR and the Retirement Outcomes Review. Everywhere Government is deliberating on how to help people who have very real financial problems in retirement and only a handful of IFAs and guides (like Richard Chilton) to talk with.
The silent majority (a phrase made famous by Bernard Levin) do not shout the odds over the lack of support they are getting on retirement planning. They don’t because they are silent.
But that doesn’t make their plight any less real. Each year that ticks by without Government biting the bullet and investing in new product (CDC) and new advisory support (the potential for MAPS) , the worse the impact of pension freedoms will become.
The private sector will fill this gap
The entrepreneur in me has seen this opportunity and is determined to meet it. I nearly said “exploit” it, but that is the wrong word.
I believe that the small pots that Brian and Richard talk of, are getting bigger and more numerous. I see people taking more interest in their pension saving and I see a growing need for mass market advice which I hope (in part) to meet.
AgeWage is the platform on which I hope to build this service. Three months ago it was a pipe dream, now it is a business with a £3.5m valuation validated by over 400 investors with getting on for £450,000 in inward investment.
We are already receiving help from insurers and trustees so that are scores can be in production by the autumn, plans to help consumers directly are well advanced. If you would like to join us, you can do , by investing as little as £11.50 (net) for a share in AgeWage.
Press this link to do so and help me put your money where my mouth is.