The radical overhaul of pensions introduced by chancellor George Osborne looks set to transform retail finance in ways not seen since the Second World War.
It is a move guaranteed to return tens of millions of pounds to savers – and a pension is a deferred income, for those who question if it is a saving – which will shake up popular retail investment vehicles.
Buy-to-lets, investments in the junior stock exchange, crowd-funding, EISs, investment trusts, venture capital trusts, and other vehicles not yet off the drawing board will mushroom within the first year of pension liberation coming into force. These changes and more will present an enormous challenge in the way financial advisers and wealth managers advise their clients.
It will call not only for new ethical approaches, but in many cases also for completely new skills sets, many of which will intrude into other professional spaces: financial analysis, company valuation, portfolio management, market structure, time value of money, asset liability management – the list goes on. Some people may even have to return to the classroom to bring their maths up to speed. It will be an almost zero sum game. If things go wrong it may be the last throw of the dice for the 50-, 60- or 70-something investor.
Of course there will be risks – in many ways the same ones that cause the present savings crisis.
Some people are just wasters – that remains part of our social history, especially with some lottery winners and the wayward children of some self-made business people. In a democracy people have the right to fail.
We cannot allow over-protective nannying to prevent a highly sophisticated and educated society from progressing, whatever the doomsayers may say.
There is also unfairness built in to the present proposals, in that members of defined benefit schemes look as if they are locked out.
Of course, some may say that a DB scheme is the Rolls Royce of pensions. This is still to be tested in the new environment, post-April. Some DB sponsors are already de-risking, but all DB members must be given a chance to access their pension pots. It is called fairness.
