There were two meetings in London yesterday, one organised by the Investment Association (wealth) and one organised by Altus/Accenture (pensions). I went to Altus and can report it, the FT went to the IA and have reported it.
Wealth
Emma Dunkley has spoken with Chris Cummings who delivers a very sensible observation
The Financial Conduct Authority’s proposals for offering free financial support should help retail investors understand the risks and opportunities, Cummings said.
“I think people would . . . welcome a discussion about why their funds are not an ATM,” he added. “You shouldn’t be investing if you want immediate liquidity — that’s what a cash account is for.”
The retail version of a pension is an ISA, an amount of money that can be counted when wealth is being measured for inheritance or personal comfort. I don’t know why people find wealth comforting but they seem to and pensions are a very bad means of valuing personal wealth. How many people value their future state pension let alone their defined benefit or annuity? The wealth computation can include illiquids – houses, farms and shareholding in anything from AgeWage to Mars confectionary and an ISA is a wrapper to keep financials in. Cummings is being very honest about what wealth is. Wealth and pensions are different and should be treated differently for tax purposes and by advisers.
Frankly, illiquidity of pension assets at retirement is not an issue pensioners should have to worry about, they want to know about lifetime income not liquidity. Decumulation defaults (aka Pension funds) can for the most part be illiquid; they’re run to pay wages in retirement – that’s what a pension account is for!
Pensions
It took me asking a question (after an hour of the Altus/Accenture meeting) to get anyone to talk about “pensions”. This was odd as it was an event about “pension reforms” and I will be reporting separately on the “focus on saver outcomes”.
At one point , the CEO of a master trust said from a panel that by enforcing pensions to pay retirement income for life, the Government was enabling it to do away with the state pension!
I don’t know if he (there are no female MT bosses) felt that all the state pension would be phased out, or we would have an Australian style “means-test” or whether it was just the supercharged indexation we’ve had since 2010. But I was sitting next to one of his colleagues and she had to restrain me from throwing my Altus notepad into the air in horror!
If there is a feeling amongst those who manage pensions schemes that they are actually wealth managers and that the conversion of pots of wealth into pensions for life is another attempt by the Government to diddle the saver, then I think they need a talking to!
But I got the feeling within the Altus Conference that my question about default decumulation (aka pensions) and his statement about converting pots to pensions being a path towards lower state pensions showed pension reform as mandated privatisation of public obligations.
My view is very simple, saving for pensions is just that, you can opt out to have your pot as wealth and spend it as you like but for most people, the default will pay them an income for life – whether you call it a pension or something else. While Cummings is straightforward in the FT, I’m not sure the audience and speakers at the Altus event – matched them!
I am not sure what rule we were under but to be safe I won’t quote speakers, nor does it matter, I quote the feeling of DC pension managers and suggest that wealth management (the job of Self Invested Personal Pensions) is quite separate from workplace pensions and the consolidation of pots into £25bn+ pension schemes, has nothing to do with running individual plans for those who consider themselves “wealthy” – or aspiring to be.
Why I am a pension person.
As I walked out of Canary Wharf, I found myself struggling to escape the electronic gates! We were of an age and humour – she turned out to be Carl Knight of TISA and as a result of our entrapment we had a chat, I’ll send her this blog as TISA straddles wealth and pensions and could be helpful as AI is in understanding it!
In the UK, TISA stands for The Investing and Saving Alliance. It is a not-for-profit membership organization representing various sectors of the financial services industry, focused on improving financial wellbeing for UK consumers. TISA works with its members to develop policy proposals, provide technical support, and influence decision-makers in the financial sector.
I will not stray into wealth and hope that wealth will not annoy those in pensions! We are DIFFERENT (see title of this blog). But we need organisations like TISA to make things clear. We cannot have everyone corralled into defaults and denied pension freedoms and we cannot force those expecting a pension to go through extravagant research into the alternatives.
There were speaking from the Altus platform who seemed to see the job of those running pension investment platforms as needing to know their customers to ensure they got the decumulation that best suited them. That is the kind of wealth management thinking that makes me and many savers crazy.
Please please please let us steady savers have the pension we have been buying – some of us more than 40 years in saving – so that we can get on with living our lives – comfortable with the income coming our way!
Not all of us measure pots as wealth, indeed most of us see them as the way to get a pension!
You’ve captured something fundamental about financial security. Wealth provides comfort because it represents control and certainty in an uncertain world.
Money in the bank doesn’t depend on someone else’s promises, economic conditions, or your ability to keep working. It’s yours, tangible, and can be converted into what you need when you need it. Whether that’s paying rent, handling a medical emergency, or simply choosing to take time off – wealth gives you options that don’t rely on external factors.
Promises of future income – whether from employers, government programs, or investment returns – can be broken. Companies fail, policies change, markets crash. But actual accumulated wealth, properly managed, provides a buffer against these uncertainties.
You fundamental issue is inadequate pots.
Agreed on the psychological aspect to this, but ‘money’ in the bank is but a spent token if it’s not part of and feeding the enterprise capital of a nation?
Lazy money was not my assumption The wealth has to be reinvested in productive work.
There is a flaw in the system of bigger and bigger asset management as few start ups meet the £50M threshold of due diligence costs so the best opportunities are softened strangled at birth.
Once upon a time, the UK state pension was intended to provide at least a third of a retiree’s income, with the goal of being a significant portion of their retirement income.
While it was designed to be a foundation, it’s clearly no longer the case that it reaches that aspirational level for everyone today.
Cowardly capitalism in HM Treasury and other places see that laudable idea of “a third” being watered down to “a fifth” maybe?
Andy Young, occasionally of this parish, more often on LinkedIn these days, recalls the good old days of SERPS for some, before Treasury policy and others took us all in a different direction.
Daniel Ben-Ami’s book, Cowardly Capitalism, is now nearly a quarter of a century ago. Andy Young has called for someone to update Anthony King and Ivor Crewe’s book after 2010, but personally I’d like to see an update of Mr Ben-Ami’s book (as well).
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