It showed the company valued its staff’s concerns about the pension scheme changes and were committed to helping us make the best individual decisions.
Although way back in the past (think 1999 and then in 2002) I had nice defined benefit pensions, I left these well alone and they have been deferred until my retirement.
Since then I’ve had four defined contribution (DC) pensions schemes (Scottish Equitable, Aegon, Friends Life and now Zurich).
My idea was to combine all these four DC pensions into one, with Zurich. To this extent, I sought the advice of a pensions adviser, letting him know upfront I had £1,000 to play with.
I carried out my own Finametrica risk profile (correctly guessing upfront I was a 5.4 on the Risk-tor Scale). I sought all the requisite information from the various providers.
I’m all for paying for an adviser to do for me what I just don’t want to have to do myselfEventually after some chasing it became clear the love was one-sided. I was advised (for free) to get Zurich to do it for me because as they were all DC pensions, post-freedoms it would be possible for the provider to do it all.
Maybe £1,000 wasn’t enough for the paperwork involved. Maybe Zurich could do it for nowt. Maybe it would be easier to get the provider to sort it out, if I provided the proper documentation.
The problem is, six months later, I still haven’t moved all my various pots. I’ve got £54,000 sitting in these various DCs and haven’t had the time or, honestly, the motivation to get this sorted out.
What I wanted was someone to do it for me, especially as the money would be coming from my company and not out of my savings.
This is exactly the reason I pay an accountant £300 to do my tax returns each year. I make barely any money from my freelance work - less than £5,000 a year - but I still have to fill in a long self-assessment form, sort out all my shares, investments, charitable giving, etc etc.
Last year was the first year I asked an accountant to help me out. It was like a burden had been lifted. I just had to give him my box file of financial information for 2014-2015, and he got it done in minute detail. I had no subsequent letter from Messrs Tax Grabbit and Fine (HMRC) telling me I’d either over paid or under paid.
Two years ago, HMRC told me they’d overcharged me £600, and paid this sum into my account. Later that year, it wrote again asking for it back. Evidently the Jim Henson Workshop is missing some of its characters and they’re working in Whitehall.
So I’m all for paying for an adviser to do for me what I just don’t want to have to do myself. I already work, cook, clean, educate, freelance, teach and mentor outside of my day job. I don’t want to have to do my own pension and tax planning on top of that.
Therefore when I heard the government had said £500 could be set aside from a pension towards getting financial advice, I thought: “great”.
Then I thought: “wait”.
£500? If £1,000 wasn’t enough then how far will £500 go? That’s barely 1 per cent of my £54,000 DC pension pot.
Moreover, that’s £500 not given as a government subsidy, a form of financial legal aid. It’s £500 out of someone’s pension pot.
Given Mode Wage research has revealed the highest number of UK households were taking home salaries of £15,000 (far below the national average), how much of a slice of their potential workplace pension pot would this take up?
And how would this affect the returns on their pot?
I’m tending towards the view of Jamie Smith-Thompson, managing director of pensions advice specialist, Portafina, who says: “The proposal being discussed sounds more like a gimmick than a well thought-out-solution to what is a problem of education more than accessibility.
“If £500 is significant enough to make the difference between your getting advice or not, then it may also be a significant part of your pension, especially if you are younger.
“Taking it out of your pension to get advice on something else means you lose all those future years of compound interest – the advice could cost you thousands ultimately. I think this sends the wrong message to people about the purpose of your pension, and does nothing to highlight the various benefits of putting more money into one.”
I’m just not convinced giving people access to £500 out of their pension is such a great idea. It won’t get them the sort of advice most of them need, and could end up hurting their overall returns.
Government should go back to square one and think about how to educate people for free.
simoney.kyriakou@ft.com
