You can just imagine the hurrahs around the table as some clever clogs came up with the idea for lifestyle pension funds.
“We don’t want to get the blame if a stock market crash knocks the stuffing out of someone’s pension just before they retire so let’s gradually move them out of the market.”
So the orthodoxy has become to shovel pension savings from shares to bonds and gilts over a five to 10-year period.
I have always thought this was nonsense. If shares have served you well for 20 or 30 years why abandon their greater growth potential when you have finally built up a sum worth investing? Besides which, fixed interest carries its own risks.
Chris Darbyshire, chief investment officer at 7IM, was latest to highlight the sham saying that “by reducing investment risk at the point when you are at your wealthiest you reduce its enormous potential benefits”.
Last year consumer group Which? suggested a £200,000 pension fund could be worth £76,250 less if glided out of shares in the last 10 years before retirement.
In truth life-styling has never been about reducing risk for investors. It was devised as a one-size-fits-all option by insurance companies to deflect risk from them and their tame financial advisers.
That is not to denigrate the role of financial advice. 7IM says that those who take it on their retirement planning have an estimated £48,279 more in their pot compared to those in a similar income bracket who go it alone.
But lifestyling takes little account of personal circumstances and disregards the risk of not being in the stock market – a risk highlighted by the terrific returns of the past 10 years.
It is a triumph of marketing over stock market sense, investment history and hard data.
Yet £100bn is estimated to be tied up in such funds that are leading people by the nose towards a poorer retirement than they might otherwise enjoy.
DWP website woes
A couple of years ago I requested a state pension forecast.
I was shocked by what I received. This “forecast” provided few clues as to how much pension I was likely to receive – just a picture of where I was at that moment and a convoluted and unhelpful explanation of deductions made for the years I was contracted out.
Two years on things have improved beyond measure – in some aspects at least.
The bad news is that the website would not let me in. Apparently it could not “identify” me.
I called the helpline, but was told this was only for technical difficulties (I thought logging on was a technical difficulty). An email elicited the information that they were “aware some customers had been experiencing difficulties accessing the system”.
So I phoned and after assuring the operator that I had tried the webpage I was promised a forecast.
It arrived yesterday and what a revelation. Gone are the reams of small print and explanations.
In its place are bold and clear explanations showing the figures you really want to know: how much you could get when you retire; how much you have now; and for how many more years you need to contribute to reach your maximum.
There is even a well-explained section showing how much you would have been paid had you not been contracted out.
So full marks to Department for Work and Pensions for the new statement, but a D- for directing people to a website that still does not work properly.
Get pensioners to pay for pills
Theresa May should not have been surprised at the opprobrium heaped on her when she targeted pensioner benefits. In politics pensioners are sacrosanct. But why should all pensioners receive a winter fuel allowance and free prescriptions while children lose free school meals?
I do not need these benefits, though I will qualify for both in a few years simply on account of my age.
But I did need free school meals after my dad died – and I still recall the shame of having to present vouchers that showed my mum was too hard up to pay.
Giving state hand-outs to millionaire pensioners is barmy.
On the other hand means-testing the winter fuel allowance could lead to the poorest not claiming.
So why not make the fuel allowance taxable for higher rate taxpayers?
As to free prescriptions, we could start with a campaign to persuade better off pensioners to dip into their pockets and pay the £8.60 themselves.
We could even give them an “I Supported the NHS” badge and a free lollipop.
Tony Hazell writes for the Daily Mail's Money Mail section
