In the build-up to pensions freedoms, it is becoming crystal clear that the people in the firing line, the At Retirement generation, are not getting the attention they deserve.
The changes introduced by chancellor George Osborne in his March Budget, will in time prove to be historic.
In an overhaul that has the look of being drawn up on the back of an envelope, he has moved the pensions and investment sectors forward by leaps and bounds.
The proposals have led – or in time will lead – to new business models, product design and distribution methods and, of course, product pricing. Since April the sector has had an opportunity to examine the proposals in detail and put in place systems to meet the new challenges.
But, apart from tinkering with annuities and promises to meet the new proposals, very little in terms of public education has been done – and that is going to be the heartland of the new freedoms.
Many people, a vast number of whom have never had large sums of money, will access their pension pots with the bold intention of ‘investing’ in buy-to-let houses, playing the stockmarket, Isas, and other vehicles.
These in the main will be people ignorant of risk and reward, and the risks of investing in a low interest environment with irrational expectations.
Product providers will focus on yield, with a few rogues taking chances on high returns on high risk products.
We already know that the Prudential Regulatory Authority employs about 100 actuaries who often struggle to understand some business models and the underlying assumptions behind their own products.
We also know that the FCA, the PRA’s sister regulator, has in the past interviewed actuaries responsible for the design of some products who found it difficult explaining the profit centres.
It is at this juncture that financial advisers, not renamed debt advisers, will come in to their own, warning and educating would-be investors about risk and opportunities.
Come April we will be in a new financial landscape, with all the challenges and temptations that this will create.
