Caveat Vendor when it comes to pensions

But with eight meetings yesterday (Wednesday 23), five of which were about pensions, and two today (Thursday 24) I have got the feeling I cannot escape from talking about them. And the more I hear, the more I have the uncomfortable feeling of deja-vu creeping over me.

I first started writing about pensions in 1999, although my holiday jobs had been spent filing forms in deferred pensioner folders for the then Croydon Council Pension Scheme. It was funny listening to the Occupational Pensions Regulatory Authority speak about the need for transparency, simplicity and joined-up thinking.

I remember then chairman John Hayes calling for better, cleaner workplace pensions, where employers were able to engage their workforces more to help bring them on board.

When I asked at the time why employers could not give their staff better information, I was told that it was because no scheme sponsor was prepared to be at risk of giving unqualified advice.

Corporate documents were bland - still are - and basically informative, with company lawyers no doubt giving them the once over to make sure that there is no form of directed guidance that might lead me to make a decision about my pension.

Paternalism turned to protectionism, driving people who wanted help towards financial advisers, while many people just didn’t bother with a pension at all.

Cue one big savings gap later, and the government has implemented a raft of changes that, I hope - genuinely - will improve more people’s retirement outcomes.

■ We have quasi-compulsion in the form of auto-enrolment (and hope they stay there).

■ We have the government cutting the ties that bound us to one annuity for life, which is something that Steve Webb hinted to us in January but we didn’t expect the Budget announcement.

■ And we have advisory Magna Carta, giving everyone access to “free” advice at retirement.

All these things sound good - perhaps OPRA would have hailed these changes - but we work now in a very heavily regulated environment.

■ Schemes still can’t give scheme members anything more than bland information at the risk of sounding like giving them advice or recommendations, so they are bringing in advisers to help.

■ However, advisers charge for advice. So the government’s “free” advice can’t be any more than guidance - unless it subsidises proper advice. And who pays for this? The taxpayer? The provider?

■ And with the hall pass given to consumers so they do not have to buy an annuity, they can do what they like with their pensions, which sounds like flexibility but in fact can only lead to poorer outcomes for some that do not have, or cannot afford to get advice.

To put it another way: we implemented AE because people are too uninformed and/or inert to save for their own pension. Then we give these same inert and/or uninformed people the freedom to take all their money when they retire - without giving any advice such as “perhaps you should keep this invested so you don’t incur a large tax event”. Because that would be advice. And sensible advice is naughty. BAD, BAD scheme sponsor or provider who might consider such a thing.

But when these same people who haven’t had proper advice complain their outcome has been poor, who will be to blame? Not the scheme sponsor. Not the ‘guidance’ provided with the government’s seal of approval. Not even the financial adviser - of course, the person didn’t get proper advice.

The onus, then, the finger of blame, will have to be put upon the provider of that pension scheme, because someone has to be to blame for a poorly performing fund or an inappropriate pension product chosen by the consumer.

While Bob Bullivant last week may have had good reason to lambast the greed of life companies for making annuities and similar products so expensive and so unattractive in the past, the fear of retribution when the government’s latest changes go awry will only serve to make providers nervous about bringing in new products or innovations to their services.

Choice will continue to be restricted and a successive government will have to issue another batch of five-year pension tinkering to put things straight again. I’ll see you in five years' time.