It being a Sunday afternoon and England playing netball on the box, I offered to do the shopping for my partner. The list was short and accurate, detailing exactly what I should be paying for a red pepper, loose tomatoes, grated cheese and Taco shells. What could possibly go wrong?
Instead of doing what I was aske to, I decided to go up-market, shop at Waitrose, buy real food in a Jamie Oliver way. I returned with pork-belly, hake fillet , fine wine and no grated cheese. I bought a lot of other stuff as a mark of my esteem and took care not to use the joint account.
After 25 years together, I should have known better. The hake smelt and headed for the river, the wine was not what she wanted , the pork belly went into the freezer. Worst of all, there was no grated cheese and therefore no Tacos for me tonight.
I was and remain the 21st equivalent of Jack, clutching magic beans having sold the cow.
Give people want they want
What you think people want is not the same as what people want. No matter how much you want to parade around Waitrose with a basketful of Provençal provender, you get zero marks for bells and whistles when the shopping list has not been fulfilled.
Which reminded me of a fundamental problem with our DC orientated pension system. It is giving people what we think they want but not what they tell us they want. In 2018, Aon did a survey of the members of pension schemes they advised on (not the trustees and employers). The members, when asked what they wanted from their workplace pension, said a pension – well 60% of them did.
https://committees.parliament.uk/writtenevidence/35948/pdf/ “Our 2018 DC and Financial Wellbeing Member survey* highlights that 60% of DC savers want an income for life in retirement, but their only way of achieving this is via an annuity, which according to FCA Retirement Income data (Sept 2020) only 10% purchase. This illustrates that the need is not being met”
Not hake, not pork belly but a packet of grated cheese.
Why do we think we know best?
There was, in George Osborne’s famous promise “from this time forward , no one will ever have to buy an annuity again”, an implication of progress.
We were fed up of having to buy thin gruel in a time of famine and looked to the storehouse of wheat in a country next door. We were led from the famine of depressed annuity rates to the splendour of the Egyptian grain silos , only to find ourselves in bondage, captured by the market which now determined our retirement security.
In 2022, the average pre-retirement fund fell 20% and those without an allocation to match tax-free cash, fell more. We were giving people what we thought they needed but they wanted and had asked for something different. We gave them hake, they wanted grated cheese.
I have lost count of the number of comments and tweets posted in defence of lifestyle and drawdown and SIPPs and ETFs and any number of other solutions to the nastiest hardest problem in finance. We are very well meaning and because we shop in Waitrose , we think that most people want a wet fish counter and a fine wines section.
I suggest that we see our fancy bells and whistles as progress. We comfort ourselves in the increase of online views of our customer’s pension pots and we think that the rollercoaster we have put people on , is what they see as fun
It might be fun if you have the money to ride out the peaks and troughs of the market and you have the capacity to manage your future cashflows through a drawdown plan. You probably enjoy cooking hake (and reckon stinking the place out a sign of progress).
But most people want grated cheese, easily digestible protein that goes on top of Tacos for tea.
We must learn to give people what they want, not what we think they need.