It’s conference season again – that marvellous time of year where political parties and lobby groups flaunt ideas for problems that do not exist.
Usually they back away from these quite quickly once they realise that they have come up with an unsustainable solution for nothing.
Guy Opperman, the pensions minister, had a doozy last week, when he suggested first-time buyers would be allowed to take £10,000 from their retirement savings to help them buy a house. I did not see a single person who supported the idea and it all went quiet quite quickly afterwards.
The doomsday scenario most people had suggested would happen after the freedoms has not materialised.Lobby groups are usually better at this type of thing, often at least trying to back up their ideas with some kind of research.
Which brings me to the Pensions and Lifetime Savings Association’s big suggestions for, well, how can I say this – making the pension freedoms less free.
The PLSA finds itself in a bit of a tricky situation with regards to the freedoms in that, as a body that is there to support trustees and scheme organisers, it is notionally there to provide what is best for savers. Good investment outcomes and choices should be at the heart of everything it does.
The problem is that the PLSA has to always be a little too closely aligned to the insurance and investment industry, which so vehemently fought the idea of the compulsory annuitisation. (Yes, I realise that in theory annuitisation was not compulsory, but that was never how it worked in practice. Let’s not go there again).
Anyway, the PLSA has identified decumulation as the area where it wants to support members better, with the end result being that it wants primary legislation to compel schemes to provide support for members in decumulation.
They want to be able to signpost certain choices, and as far as I can tell, hold their hand to products, some of which may be designed specifically for that scheme.
I am not sure why the PLSA has chosen this particular area, because the doomsday scenario most people had suggested would happen after the freedoms has not materialised.
It turns out that those who were prudent their entire lives, were also prudent in retirement.
The idea of signposting though is troubling. In which direction should savers be pointed? This smells like advice, and it also has the potential for conflicts of interest with product providers – some of whom may not provide the best value.
The PLSA talks about inertia among savers, as they sleepwalk to retirement, but actually its proposals could exacerbate the problem as savers then sleepwalk into a decumulation product that is not quite right.
It does nothing to solve the problem of engagement. Those savers that do care about their pension will still shop around and seek advice, the confident will still go it alone; it is the sleepy savers who will continue to be shunted from one product to another.
I have always preferred the idea that an advice solution is needed – perhaps a tax-free subsidy for at-retirement planning, or a one-off allowance from your pension pot.
If pension schemes are allowed to signpost and nudge savers towards retirement products, fully regulated advisers could also be granted the waiver as a way of producing low-cost, generic advice.
To have one rule for schemes and another for the rest of the market would be hypocritical, and what we are really all trying to achieve is the best outcome for savers, aren’t we?
Tech news
Technical but important news comes with the consultation into changes on the administration of pension tax relief.
Are you still awake? It is dull but could lead to changes in net pay pensions.
I know most advisers do not give two hoots about this (they’ve told me on numerous occasions) as it only affects the very poorest pension scheme savers, but reform is vital to ensure that these workers, most of whom are women, qualify for the tax relief to which they are entitled.
The answer to the problem seems to be through P800 forms. Personally, I think it should be through technological change at HM Revenue & Customs. Real-time data should already make this all possible.
The only way we advance financial services is by striving for better technology at every opportunity. In the end that will be better for everyone.
Trump card
Forget the headlines: the US election is not over yet. Americans care too much about business and the stock market. While both keep trundling along happily, US President Donald Trump is not out of the race. The S&P 500 has successfully predicted every US president since 1984, and all but three since 1928.
At the moment, it says a Trump victory.
James Coney is money editor of The Times and The Sunday Times
