“Five years of freedom” – is evolution enough?

Screenshot 2019-11-15 at 10.02.44.png

The Defined Contribution Investment Forum have commissioned an excellent body of research from Richard Parkin and Ignition House. The result is a packed report running to over 60 pages that provides a new insight on the problems individuals are facing taking decisions at retirement.

My only objection to the report is its title. In the past , DCIF have been firm advocates for radical change , a recent report was entitled “ADAPT OR DIE – THE PENSIONS INDUSTRY NEEDS TO FUNDAMENTALLY RETHINK THE WAY IT COMMUNICATES”

By contrast “Five years of freedom – EVOLUTION NOT REVOLUTION” – doesn’t do justice to the bafflement of the various people who had been interviewed for the project. The digital version of the report – is now on the web. But as I wrote this earlier, you’ll have to make do with my tweets from the report’s launch yesterday.

Five thoughts

1. Pensions used to encourage people to live longer…

2.People are having to game their later life income – their AgeWage.

and they’re realistic about the chances they are taking


3.People want the freedom to get others to do it for them

4.It’s buy now – pay later

5. And what happens if your bet doesn’t pay off?

These aren’t comfortable messages for policy makers and they shouldn’t be comfortable messages for the commercial pension providers and the trustees of the not for profits.


Is Evolution enough?

The Pension Freedoms are revolutionary. They have turned pension planning into wealth management and made a lot of people with inadequate financial resources a false sense of comfort. When confronted with the scrutiny of Ignition House’s interviewers, several of those interviewed cracked, admitting they had no idea what they were doing or what they were to do. I nearly cried when one man of my age put his hands up and told the camera he hadn’t done any planning.

You could see the fear that gripped him and for him – and those like him – the need for help is urgent and acute. Telling him that – five years into the pension freedoms – advice and guidance is evolving , isn’t enough. The study found – as the FCA has found – that the best plan for most without one, is to scrape out whatever tax free cash is available and wait till a better idea came along.

For such people, even the proposed solutions being put forward by providers look inadequate. Two thirds of providers now offer advice as part of the service

But at what price?

Advice cost

What is the revolutionary conclusion?

When Jeanette Weir of Ignition House was asked what her key insight was from the research she had conducted, she said she was shocked by the ignorance of the people she talked to.

This is reflected by the title of the first chapter of the report “sleep-walking into retirement”. I think this would have made a better title for the report than the one chosen.

I have yet to read the report in detail, but have a day off today so I will. I doubt that by this time tomorrow , my opinion will have changed.

DC plans are not currently fit for the purpose of converting people’s retirement savings into a retirement plan. That may be partly because the pots are too small, but there are plenty of six figure pots that remain invested – often in unsuitable life-styled investment strategies, because of lack of product innovation.

There is no default option into which people can transfer their money and get paid an income, other than an annuity. For many “annuity” is still the right answer but for the majority of people who want more for their savings than insurers can guarantee, we need some kind of wage for life solution where the income lasts as long as the saver.

My revolutionary conclusion is that the current choices are not enough, we need a pension option which keeps people invested in real assets and provides mortality pooling. Brilliant as this report is – it points towards there being no evolutionary answer to the pension freedoms.

The inevitable conclusion from reading this report is that – at least from retirement – CDC is the inevitable solution – revolutionary as it is.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, age wage, CDC, pensions and tagged , , , , , , , , . Bookmark the permalink.

3 Responses to “Five years of freedom” – is evolution enough?

  1. happyhenry says:

    Henry, do any CDC schemes exist?

  2. henry tapper says:

    Not yet Henry. But Royal Mail is likely to have a CDC scheme by April 2021 and we’d like to see all the major master trusts offering CDC as a way of turning your pot into a retirement plan by 2030.

    It’s all gone a bit CrossRail recently

  3. Randy Bauslaugh says:

    Hi Henry,
    A couple of years ago I wrote a piece for the Association of Canadian Pension Management suggesting a Smart DC design would be to take investment management decision making away from scheme members altogether. Due to response which suggested I should provide authority to back up much of what I said in that article, I wrote a footnoted piece called Dumb & Dumber: Giving Members Investment Choice in DC Plans, which I published in a legal journal International Pension Lawyers Journal, May 2019 — the point being it’s dumb to give choice from a fiduciary perspective, and even dumber from a financial perspective.

Leave a Reply