Once you get into savings habit, it is hard to kick, and that is almost never a bad thing.
Of course, as any investment adviser will tell you, one of their jobs is sometimes to nudge older clients to spend a bit more of their hard-earned, wisely invested money too. You can’t take it with you, although even that message has been somewhat diluted by the fact you can now pass on much of your pension wealth to your dependents and all of your ISA wealth, still tax-sheltered, to your spouse.
In light of this, perhaps the most significant financial fact of the past fortnight is that retirees are still saving a somewhat dumbfounding £48.7 billion a year, as a think-tank, the International Longevity Centre UK (ILC-UK), has just pointed out – a figure equivalent to a few percentage points of GDP.
And here’s the rub – while we’ve been worrying about the ranks of feckless 50-somethings splashing out on everything from conservatories and caravans to Aston Martins and Lamborghinis, the big issue may be that many are not spending much at all and keeping it in cash.
The ILC-UK and Prudential, which compiled the most recent report, worry that as a result, we face the risk of a Japan-like squeeze if such large amounts of money end up under the futon mattress.
They want people to be offered financial health checks in their 50s and advice that should steer them into assets that won’t erode in the long term and that are more economically productive for the UK.
And so we arrive back at the Financial Advice Market Review, set up by the government and the FCA to look at just about everything.
While we’ve been worrying about Lamborghinis, the big issue may be many are not spending much money at all.This is an auspicious time to be seeking a more rational, costed, sensible regulatory regime. The former cabinet minister John Gummer (now Lord Deben, chairman of the Association of Professional Financial Advisers) believes so, as he told me at a recent debate at the annual conference of adviser 2Plan. He wants advisers to be contacting and even visiting MPs about the long stop – that is, bringing in a cut-off point for consumer complaints – suggesting that nothing else quite concentrates an MP’s mind.
Such a reform is certainly an essential part of a rather complicated jigsaw. Indeed, anything that offers stability and business certainty should be welcomed. Yet I also wonder if there is something unique for advisers to offer in terms of helping the broader community of retirees.
A blunt, Kitchener-style ‘invest in the markets for the sake of the country’ certainly isn’t the right message for older citizens. But it shouldn’t be beyond the ken of skilled financial planners to come up with more effective – hopefully more cost-effective – solutions that don’t merely involve a low-interest-paying bank account. Perhaps the Society of Later Life Advisers has some thoughts on the matter.
One thing we don’t want, however, is some sort of hideous market crash that also crashes a lot of poorly constructed drawdown plans. It does feel as if there is a huge amount of thinking and work to be done.
Investment advisers always seem cursed to live in interesting times, but perhaps this time, it can be turned to their advantage and – as we must all keep reminding ourselves – to the advantage of advisers’ clients and potential clients.
John Lappin writes on industry issues at www.themoneydebate.co.uk
