Steve Webb’s appointment as pensions minister was hailed by many as a positive step, as he has long campaigned for fairer pensions for women and to improve the creaking state pensions.
He may be on to a winner, according to some pundits, but he has his work cut out for him in getting his ambitious ‘Defined Ambition’ plans through parliament.
It is not the first time that an alternative to traditional pension schemes has been touted. Just a decade ago, the then Labour government sought the answer to the age-old defined benefit versus defined contribution argument in the form of a product that was cheap and simple. But focusing on costs at the exclusion of investment practicality meant that stakeholder pensions lingered mournfully on the shelves as employers, employees and advisers just were not interested in the cheap and cheerful product.
Now Mr Webb has a more interesting proposition that also considers risk and that is responsible for the performance of the pension. Defined Ambition will aim to match an investor’s lifestyle aims without offloading the investment risk entirely on to the individual – which makes it more appealing than DC. But it also removes the onerous costs for employers, for who running DB schemes has been more than a millstone around their necks.
Whether Defined Ambition gets off the ground as a viable alternative of course relies a lot on the industry to make it happen. With mixed reactions from providers, advisers and industry spokesmen alike, Mr Webb is going to have to pull out all of the stops to make sure it gets a fair hearing, and not just rely on the goodwill that people showed him when he started.
One man banned
As the retail distribution review approaches it seems clear that few people are banging the drum for the one-man band, the sole trader whose business was forged on the back of client trust and personal relationships.
As Tony Hazell said in his column last week, life may have moved on to the extent that the market no longer can accommodate the sole trader. Certainly we are seeing an increase in the number of firms approaching these solitary figures, offering to buy them out and to snap up their client book.
This week we report that Attivo Group has set aside £1m to snap up firms belonging to “true, honest IFAs seeking a dignified and elegant exit”. While it is good to know that those clients who belonged to sole traders will still be serviced after RDR, we are concerned indeed that “true, honest IFAs” are having to leave the industry en masse.
What will we be left with? A homogenised service from large-scale firms that just don’t have the time to give these legacy clients the sort of personalised, face-to-face advice that their old one-man band intermediaries used to provide. Let us hope the market never moves on so much that this ‘trusted person’ element of financial advice gets left behind after RDR.