Royal London Asset Management’s Trevor Greetham has said the government’s efforts to simplify the pensions system have resembled a “bowl of spaghetti”, and explained why his newly-launched portfolios cater for Isa holders.
Mr Greetham took the helm of the multi-asset team in January last year, and the firm unveiled a set of multi-asset portfolios in March, the ‘GMap’ range, to sit alongside its £13bn pension portfolio range, Governed.
The head of the multi-asset team, who previously spent nine years at Fidelity, told FTAdviser the government’s decision to boost the Isa limit, as well as pension freedoms, were at the forefront of his mind when creating the new ‘GMap’ funds.
“We have been thinking about the way the marketplace is evolving,” he said, pointing to next year’s launch of the Lifetime Isa, announced in the March Budget.
“But meanwhile, pension simplification has been a bowl of spaghetti.”
Mr Greetham said even with his background as a fund manager of many years, he found the lifetime allowance calculations “very involved and detailed”.
He admitted he had to ask a financial adviser to work out whether he was close to his allowance, despite having worked in financial services all of his life.
“The legislation around pensions has become complicated and a lot of people will end up using Isas for long-term investments alongside pensions.
“We think pensions come first, but younger investors, or those who have got lifetime or annual allowance issues, should also be using funds that are structured based on long-term investment principles, not cash Isas or Innovative Finance Isas.”
Mr Greetham criticised the Innovative Finance Isa, also known as the peer-to-peer Isa, which lets P2P lenders put investments in small businesses inside a tax-free wrapper.
He said he was worried by the sector’s lack of protection on deposit schemes, adding the provision funds - or what he described as “slush funds” - offered by some P2P lending platforms would be of little use to investors if all the loans default.
The Financial Services Compensation Scheme recently announced its proposal to include the peer-to-peer industry as part of its remit.
“We think if people are investing in Isas in the long-run, they should invest in the same principles they would use in a pensions wrapper,” Mr Greetham said.
“We won’t always be in a zero interest rate environment, so it worries me that people are coming up with new ideas that are basically ways of repackaging the more exotic end of fixed income and marking it as safe.”
The GMap portfolios mirror the Governed range, using specifically-designed benchmarks and similar risk targets.
The range is now offered on Ascentric, Novia and Transact, and Mr Greetham said the funds are currently undergoing an “involved” administrative process to make them available on some of the larger platforms soon.
Tony Catt, compliance officer at Anthony Catt Limited, said: “We have been promised pension simplification for many years. It would help if all the old rules were swept away and replaced by something simple. But it seems that each simplification simply adds another strand or layer of complication.