Whisper it quietly, but figures released in recent days may have provided the first concrete sign that pension freedom cash is beginning to find its way into the investment industry.
That’s because the Investment Association’s September retail fund sales data, incorporating both active and tracker funds, shows a sharp rise in fund sales into pensions on five major platforms.
Some £707m was invested in the month across the Cofunds, FundsNetwork, Old Mutual Wealth, Hargreaves Lansdown and Transact platforms, according to the trade body. As Hargreaves Lansdown points out, this represents a significant increase on even the £467m in sales seen in March, typically a popular month for those looking to beat tax deadlines.
Few firm conclusions can be drawn from one month’s data, clearly. But look at the sales for each month since freedoms were introduced in April, and a gradual upwards curve can clearly be detected.
In truth, it’s not been a vintage year for fund flows, as advisers and clients alike become just a little more nervous about the future direction of a number of asset classes. I think it’s fair to say, though, that pensions have increasingly been taking up the slack from falling Isa contributions. In the third quarter of 2015, £1.7bn of product sales went into personal pensions, compared with £775m into Isas.
Concluding that investors and advisers have recognised the increasing similarity of the two savings regimes – whatever the eventual outcome of the government’s consultation on pensions tax relief – may look increasingly sensible if these trends continue. Perhaps being able to do what you want with your pension really will come at the expense of Isas.
So what developments will ensure this focus on longer-term savings continues? The path is likely to be a lengthy one: the decumulation phase is a lot more complex to advise upon than Isas, of course. Advisers and their clients face a tricky time in ascertaining exactly how they reach their required goals.
Product providers and platforms also face more challenges. Calibrating how to produce products able to meet more multifarious needs will take time, and platforms’ efforts to more effectively serve advisers’ retirement planning requirements could take even longer. I imagine it won’t be too long before advisers come to expect – and demand – more than just the status-quo offerings, but for now at least it looks like existing funds are doing the job nicely.
Dan Jones is editor of Investment Adviser