Pathways? – We can’t see the wood for the trees.

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Investment pathways

Investment or retirement pathways- as the title of an event I went to had it, are the FCA’s idea for helping people take better decisions at retirement than they do today. They’re mainly for the people who don’t take advice  but who want a bit of guidance about what to do with their pension pot(s). You can read the technical stuff here

Getting out of the woods…

The  event late yesterday afternoon promised I’d find a pathway out of the woods, I left it thinking we are lost in that wood and that we have yet to find a way of guiding ordinary people to good decisions on how they spend their pension pots.

I don’t want to point fingers at individuals but  collectively the 60 people at this conference showed no cohesion, no common sense of endeavour. Instead I witnessed people struggling to work out who their customer was, what the customer wanted and how to meet the needs of ordinary people. Worst of all, when we heard from those customers they were – to use Janette Weir’s phrase “all over the place”.

We should be familiar with what people are doing with their pension savings , the pathways they are taking with the pots they have saved. But do we have any empathy with the process of retiring? Do we understand what its like when you’re in the woods and can we create pathways that help us find our way out?

On the evidence of what I saw yesterday it is not just the people we are supposed to be helping who are “all over the place”.

Saving enough to stop work?

This phrase “saving enough to stop work” resonates with people, I know my colleagues at First Actuarial run workshops on this theme and people see saving money for later life, not as an end itself but as a means to an end – and that end is work.

I have seen many retirement modellers over the years , but I have never seen one that has “work” as one of the sources of retirement income. And yet most people treat work in retirement as part of their retirement plan. For the well-heeled retirement may be a chance to work pro-bono, for the less well-off , work in retirement is a way of supplementing income from pensions and savings but almost everyone finds themselves working in retirement in one form or another.

That this isn’t acknowledged in our retirement modellers worries me. If we are trying to help people to take lifetime decisions on what they do with their pension savings, ignoring people’s capacity to work and acceptance that they want or have to work, puts on a different page to those we are supposed to be helping.

This is where financial planners (like Chris Budd of Ovation) are so helpful to the conversation. Rather than closing down a conversation by telling people what their options are with their money, good financial planners start by finding out what people hope for in the second half of their life and plan around that.

This empathic approach to understanding what people want is almost entirely missing from the formulaic solutions that people get offered – whether by Pensions Wise or by an investment algorithm.

People do want to save enough to stop work, but that doesn’t mean a binary decision to work or to retire and investment pathways have to recognise that what comes from pension savings may not be getting the people we’re guiding close to leaving the woods.

Seeing the wood from the trees

Defining where we are in the dark wood of uncertainty that marks this transition from work to retirement is really important ; people can’t decide which pathway to take until they know where we want to go.

Here is a blog written by a woman called Carolyn called “lessons I’ve learned in retirement”.  I don’t know much about her except she’s American, affluent and she’s coming out of that transition period. She has seen the wood for the trees and she seems to be out of the woods (in a number of ways).

Of the eight lessons she’s learned, only one is about money, the rest are about adjusting to change.

I would say this is the same in most of the conversations I have with people who are the other side of what I call the “strait of Hormuz”. It is not the pension that leads to a happy retirement , it is people’s capacity to accept the changes that retirement brings. Pensions only oil the wheels of those lifestyle changes. Many people manage the changes without  the help of a pension at all.

For us to see the wood from the trees, we should accept that the financials are only a part of retirement and that we as pension people are only oiling the wheels. Woods – oily wheels – the Strait of Hormuz – please forgive my mixed metaphors – I too feel all over the place too!

Can Investment pathways help people out of the woods?

We will have investment pathways by August of this year, at least for our contract-based pensions. The man from Fidelity complained that half of his customers were members occupational DC plans and would get no pathways while the other half were policyholders in personal pensions and would be sold pathways as the way of getting out of the woods.

Clearly whatever is going to be done is going to be as messy and confusing for savers as it’s going to be for Fidelity (or any of the pension providers I spoke to yesterday). One lady from a big SIPP found herself telling me her company’s strategy was to “create friction” so that customers didn’t find it too easy to get their money. The investment pathways may be done purposefully badly to keep  customers in the woods a bit longer!

My impression of the three hours I spent at this event was one of claustrophobia, it was as if everyone was caught in a loop that had been endlessly repeating since 2014 when we first had to start thinking about what we do with pension freedoms.

What has to be done is to break out of this loop and start thinking about it from the saver’s point of view. I’m going to sum things up by returning to the  things that came out of yesterday for me

  1. For most people people will not turn a pension pot into a retirement plan
  2. The retirement plan comes out of adapting to change, money just oils the wheels
  3. We forget people’s capacity to work in retirement and how this impacts thinking on saving or investment
  4. People want to maximise the value of the money they’ve saved, the investment pathways can help them do that
  5. Nearly a quarter of people want to be told what to do with their pensions and don’t want freedom at all.

But it is really important that we don’t see these pathways as “job done”. It may take twenty years for a consensus solution to emerge on whether people have benefited from pension freedoms and we may end up concluding that they haven’t and go back to some kind of collective solution.

There’ll be no quick fix.


“If pensions were easy, Martin Lewis would do them”. (That was another conclusion that Janette and I came to after the event). Pensions are hard (as Jonathan Parker’s talk confirmed).

We have agreed to be a part of the great pension liberation program – “the freedoms” but we are stuck in thickets and cannot see the wood for the trees. We are nowhere near getting out of the woods yet and we shouldn’t pretend that investment pathways will be more than a small part of the answer.

To get people to make the transition, we need them to become as clear-headed as Carolyn. They may not be able to articulate what has enabled them to transition into retirement as well as her, but most people find a way to a retirement plan of sorts.

But too often they get let down by their pension pot which doesn’t do for them what they wanted. Rather than oil the wheels of a happy retirement, it becomes a source of worry and concern.

Our job is to stop that happening, our job is to make people comfortable that their pension pot has become part of their retirement plan.

Thanks to Redington and QuietRoom for organising

Although I found the event frustrating, the event was worthwhile. It made me understand the challenges of building the investment solutions, communicating the pathways, delivering the choices and adapting providers to meet the challenges ahead.

It helped me in my thinking about what is a retirement plan and how we can integrate pension pots into people’s future planning,

Investment pathways are one small part of the answer. To get out of the woods, we need to find ways to connect with the decisions in later life that really matter to people, decisions that affect family, health and insurance against getting old.


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, pensions and tagged , , . Bookmark the permalink.

7 Responses to Pathways? – We can’t see the wood for the trees.

  1. One thing which has been missed by most people about the introduction of Universal Credit is the fact that, because it can’t be claimed by people over state pension age, there’s no longer any in-work benefits support available for them. Working Tax Credit could be claimed by pensioners and that helped people maintain their living standards, often as their work gradually ran down. Another safety net disappearing.

  2. henry tapper says:

    I also had a conversation with Jannette last night about benefits. This part of the financial equation is totally ignored in the guidance given to people, we have a great deal to do if we are to help ordinary people get sensible retirement plans which include entitlement to benefits. Thanks as ever Gareth

  3. Brian G says:

    Pathways are a sensible idea for non advised customers as they at least will help reduce the folly of staying in cash and also make it easier for many people to decide how to invest their retirement funds. However, for many people who are not tuned in to thinking clearly about the role of their pension savings in financing their future lifestyle there will be a great problem in understanding what pathways mean. Many people are financially illiterate and whilst pathways could definitely help those who know what they want to achieve there will still be millions who will remain baffled when their provider asks them to fill in their pathway form/online instructions. Several problems will remain, the very biggest being that most people save far too little to have any meaningful choice because their total available assets and income are just insufficient. The FCA are right to identify the problem of non advised drawdown and pathways are potentially a significant improvement to investment choices for such customers. But there remains the much bigger problem that most pensioners face poverty once they stop work. So the bigger issue is not how to invest the tiny amounts in their pensions but how as a society do we provide opportunities to save and awareness and motivation for those with such opportunities to set aside a lot more than they currently do. As Gareth rightly pointed out the other major issue is to provide additional support for those who are genuinely unable to continue working due to lack of health or capability as they age. And as regards annuities, they will not be selected by many whilst long term interest rates are so historically low.

  4. henry tapper says:

    I agree with this. Actually, we really should be thinking about alleviating poverty through helping people in later life find work they can do. This is a task for a department of work and pensions and we shouldn’t think of the two as mutually exclusive.

    Accepting that a large proportion of us either want to or have to work longer should not be an admission of defeat, but an acceptance of reality.

  5. NEST provides a decent product, although not that cheaply, but at a fair proportionate cost for the individual. Without undermining the financial services industry, or stifling innovation, we need ‘safe harbour’ style simple products that folks can trust. That’s why a majority like National Savings and deposit accounts, despite making a real loss after inflation.

  6. Adrian says:

    Carolyn sounds like someone with their head screwed on straight! but also with the backup of a widows pension when her husband dies.

  7. Thanks Henry for moving the discussion on. I agree, we’re all in the woods. It’s one thing for the the experts to have a good idea of what needs doing, just communicating it is difficult. It’s another for both parties to be in the dark.

    I think your point about people continuing to work should be part of the conversation. But in 10 years time are there going to be enough jobs? In caring for people, yes. And in voluntary work. But these won’t be enough to provide paid work for those who need to supplement their savings.

    I agree that we need to a better understanding of how the benefits system works for people in retirement. Next time we should bring in somebody who understands the benefits system and somebody who understands how the world of work is changing. (I went to an excellent presentation by Camilla Cavendish who wrote ‘Extra Time, 10 lessons for an Ageing World).

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