Personal PensionJul 22 2016

More must be done to attract young to pensions: Portafina

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More must be done to attract young to pensions: Portafina

Pension freedoms, auto-enrolment and better use of technology have all helped to get younger people started on the road to retirement readiness, but there is still a lot of ground to cover.

This is the view of Jamie Smith-Thompson, managing director of advisory firm Portafina, who said more needed to be done across the industry to help boost people’s pension pots.

Speaking to FTAdviser’s Simoney Kyriakou, he suggested the first thing to do was avoid using jargon and making financial information less off-putting to ordinary people.

“Sometimes in the industry we forget the language we use is confusing”, he said. For this reason, when Portal Financial rebranded as Portafina earlier this year, Mr Smith-Thompson said the firm employed a copywriter from outside of the financial services industry to make sure the wording on its website and marketing materials was jargon-free.

“I think most people are not financially educated”, he said, “which puts them off getting advice. They may think they are going to look silly or ask questions that will get them get laughed at, so education is really important.”

Mr Smith-Thompson said he believed there was an advice gap, particularly among the young, but the effects of this gap have also been made evident at the point of retirement.

Again, he said partly this was the fault of the industry for poor communication.

“There are things we could get better at as an industry. It should not take months to get policy information. We could be far more immediate than that.”

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With regard to the pensions freedoms, he claimed he was encouraged by the press coverage given after the pensions freedom and choice regime came into force in April 2015.

However, Mr Smith-Thompson commented: “While this was far better than having people defaulting into an inappropriate annuity, the environment is still massively confusing.

“There are nearly too many options, such as annuities, enhanced annuities, full drawdown, Uncrystallised Funds Pension Lump Sums, and so we are seeing people coming back to us who had been so confused by all the options they just defaulted into an annuity, which wasn’t ideal.”

However, he said there was an acknowledgment that more needed to be done.

He added: “The industry and the Financial Conduct Authority are trying to bridge the advice gap with the Financial Advice Market Review (FAMR).

“The average case size for us is between £50,000 and £60,000, and this is where the biggest advice gap seems to be, which is what FAMR is there to address.

“For young people, the FAMR review shows it is very difficult for financial advisers to make it economically viable to take on younger clients with smaller pots.

“We have to accept that some of the young people we advise are not affluent now, but may become more affluent later on.

“Now we can’t take on everyone but we do try to take on as many people as possible. But to do this, we need to have economies of scale in our businesses, and that comes with a more flexible, technology-based model.”