I’ve been building up momentum for the idea behind AgeWage for about a year now. So far we have raised £500,000 through a crowd-funded EIS scheme, built an algorithm, created a new pensions index with Morningstar and incited sufficient hostility on social media to suggest that we are considered something of a threat – a disruptor.
But what is AgeWage disrupting?
AgeWage sets out to challenge the established notion that people know what they are doing when it comes to their retirement planning. We don’t think they do.
- We don’t think they know how to find their pensions
- We don’t think they know how to evaluate their pension plans when they find them
- We don’t think they know what to do with the money they’ve found, even if they can make head or tail of what they have.
To help people find their pensions in a better way than they do today, we need a proper pension finder service and a dashboard that displays people’s rights. This does not need to be the last word in analysis, it just needs to start people off. The Government should be building this now and the dashboard is becoming pension’s crossrail.
So no help from the dashboard for AgeWage in the foreseeable future , people will have to carry on the laborious research into what has happened with their money or let it sit with the £20bn of lost assets the PPI reckon lie dormant today.
If anyone thinks that as we enter the third decade of the 21st century, it is acceptable not to have a national pension finder service, please raise their hands. I will not. But as a disruptor, I have no voice, we expect a dashboard by the end of the year and despite our protests about the need to embrace open pensions, the prospect of access to our data in machine readable format , remains a distant one.
When we find out money it may be in a variety of plans. Personal pensions and their constrained cousin stakeholder pensions, the earlier 226 plan, an occupational DC pension scheme or a multi-employer variant – a master trust. We may find our money in self-invested personal pensions, small self-administered schemes or in AVCs to defined benefit plans. Some of this money is managed under a contract, some under trust.
What brings all this money together is that ultimately it is ours – we are the beneficiaries, but we are give precious little access to the information we need to work out how we can manage it so that we can spend it best – in later life.
If anyone thinks that ordinary people have been given the freedom to do with this money as they like, they reckon without the appalling burden that we are placing on people who are not pension experts, to take decisions with little or no management information.
If there was a service that helped them take these decisions I would be less worried, but there is not. The Money and Pension Service is the best we have but it is not geared up to helping people fulfil their financial plans, it necessarily is a first stop, but there is no second stop – other than to rely on good luck in personal judgement. Most people do not feel lucky.
When it comes to working out what to do with the money we’ve found, most of us are all at sea. Even had we a dashboard, there is precious little to signpost people to. For all the talk of “choice architecture”, the average person does not have a series of investment pathways to explore. This is why standard practice for those at retirement is to strip out tax free cash and live on it – till something comes along to help.
Creating a wage for life – an AgeWage.
The financial planners I know are right to call for people to have a cashflow plan for later life and to manage their retirement savings around this plan. In an ideal world, the consolidated savings that we have , could be spent according to this cashflow plan in a reasoned way.
But again the capacity to build and monitor this plan – let alone manage the drawdown around it, are way beyond the financial capability of all but a tiny minority of us. It is not realistic to expect the 94% of us who are not paying for financial advice, to do this job for ourselves throughout retirement.
Like many good plans, it may start well, but it will move into dereliction over time unless tended and monitored. We are asking too much of people to be their own actuary and CIO, to manage liabilities to variable income forecasts. It is -to quote William Sharpe, the nastiest hardest problem in finance.
It is vanity to suppose that we have in place the infrastructure needed for people to manage their retirement affairs in an age of pension freedoms. MAPS and Pensions Wise are not enough, the Pensions Dashboard is late and we have established no way to evaluate what we have to make sense of it and convert our money into pension.
This is the problem that AgeWage sets out to solve. Of course it cannot solve it on its own. It needs advisers to point those who want and need advice to employ, it needs the help of providers who can offer the investment pathways for the pots they manage on behalf of us, we need consolidators like MyFutureNow and Zippen to help people bring money together and we need a system of evaluation – what AgeWage is currently testing, to help people compare their pensions and take action.
We need too annuity brokers who can show people what can be purchased to provide certainty. Organisations such as Hub and Retirement Line exist – and are under valued. We need them to be essential to people’s at retirement decision making.
It is absolute vanity to suppose that what needs to happen, can happen with the existing infrastructure. Patently it cannot – there needs to be disruption for ordinary people to get proper choices and make good decisions.
Disruptors aren’t always reverted to mean
Last night I was given the wisdom of a group of young analysts who had been studying my business as part of their training with a major consultancy. Their advice to me was to build a platform to manage the assets of those who had never saved and advise on the debt of those who had hit the buffers. Socially philanthropic as this service sounds, it is not a commercial activity that I can commit shareholder funds too.
It seems that we must be polarised into a bucket marked “charity” or a bucket marked “wealth”. The concept of doing things for ordinary people with ordinary needs is not enough.
As I hope I’ve argued in this blog, the needs of ordinary people are not being met. What is the point of focussing on the poorest or the richest when the vast majority or the problem is in the middle?
While listening to the advice I was being given, I realised that the vast majority of the conversations I have with financiers, consultants – even Government – assume that AgeWage is going to revert either to a charitable model of a wealth model. We will fall in line with market practice rather than disrupt it.
We do not intend to revert to mean. We will not be advised by consultants or financiers to walk down well-trodden ways. AgeWage is here to innovate, to create a new and different service for those who fall between the extremes of dependency and wealth.
Ordinary people deserve better and we intend to give it them. We will not revert to mean, we will disrupt.