There has never been a more exciting time to be in pensions.
Admittedly that may be an accolade along the lines of ‘world’s tallest dwarf’, but the changes that will come into effect in April represent a fundamental change in how retirement funding will work and, consequently, how advisers can plan for it.
The new rules have been universally welcomed. Their announcement in last March’s Budget sent everyone bar annuity providers (and their shareholders) into a frenzy of joy unconfined.
This euphoria has sustained, as we all anticipate a world populated by pensioners skipping through an all-singing, all-dancing Retirement 2.0, while advisers help them live every aspect of a well-funded life to the full.
Such was the outpouring of glee; it feels like only yesterday the reforms were announced.
And therein lies the problem. In real terms, it really was only yesterday. As I write this, we are 53 working days away from the new rules kicking in.
And as yet, we are still waiting for the raft of new products that were going to arrive to exploit the new-found freedoms. Instead all we have are a few repackaged investment vehicles to complement the existing options like drawdown and annuities.
As I write this, we are 53 working days away from the new rules kicking inPensioner bonds, unveiled in the same Budget speech, could have provided a stimulus for other market developments, but they will have sold out by the time the freedoms kick in, and they don’t pay a regular income.
This lack of joined-up thinking has sadly characterised the way the changes are being pushed through.
There is one simple reason why the industry has so far failed to deliver the innovation we were all promised: there has not been enough time. Considering how significant these reforms are, the speed at which they are being brought in is terrifying.
The industry as a whole has had little or no time to prepare. Every provider has been confronted with a choice of not being ready or throwing together a hasty proposal which has not been properly thought through.
Companies were afforded no time to get their collective heads around the announcement; they were only given months before they would be expected to unveil some product in response and already the clock was ticking.
But even the minimal preparation that providers have been allowed seems more extensive than the work George Osborne put into the idea before unleashing his plans. The fact so many of the details have had to be worked out since, coupled with the apparent lack of warning for affected companies and even the regulator, make it seem as if the chancellor came up with the idea in the car on the way to the Commons.
To present a finalised outline of the changes with barely a year’s warning before their implementation would be too short notice. But even worse was that Mr Osborne’s vision was anything but finalised – the drip feed of clarifications and amendments is still ongoing.
Details of the much debated guidance guarantee have only just been sorted. Having initially outlined plans for providers and the government to foot a £20m bill, once the sums had been done, the cost was recalculated at £35m, with advisers expected to pick up a £4.2m share of the tab through another levy.
Each announcement comes ever closer to the new rules’ arrival and leaves less time to factor it into whatever solutions are being built. Further, each shift of the goalposts lurching us towards the new regime only serves to alienate and antagonise a different part of the industry.
So, the most significant development in UK pensions policy in a century, since the introduction of the state pension, was seemingly founded on a whim supported by little more than back-of-a-fag-packet calculations.
Obviously I exaggerate, but your profession deserves a bit more clarity. Personal finance is one of the biggest industries in the UK, a key contributor to the economy, employing over 2m people and serving a lot more.
But the chancellor is happy to force it to bend to his needs to score a political point. I have no doubt that the chief motivation for the hurried timeframe is to ensure changes came in before the general election, as a sop to the demographic most likely to vote.
Financial services is not often a fast-moving industry. Nor should it have to be.
Today’s is a culture of instant gratification, where you can order a pizza delivery at 3.55am and be eating it at 4; where your mobile phone has grown antiquated by the time you are home from the shop; where you can not only stream pretty much any film ever made in seconds, but are also able to miss the entire thing while looking up – instantly – which other films you recognise all those vaguely familiar looking actors from.
Everything is on hand in a heartbeat. And that is brilliant. But it is easy to forget that there is often also a case for taking things slowly and maybe focusing on doing things properly rather than quickly, even if it means missing the deadline for a few votes.
