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‘The bomb has already gone off’: Julie Lord on the future of pension freedoms

Julie Lord at the Festival of Financial Planning

Prominent financial planner Julie Lord has used a speech at the Personal Finance Society’s Festival of Financial Planning to warn that, without financial education, the pension freedoms will end up hurting consumers and the advice community.

Lord, who sits on the PFS’s practicioner panel and chairs Prestwood’s board, said  “the bomb has already gone off” for pension freedoms, but this will leave many retirees vulnerable.

She said: “Its like lettering children loose in a sweet shop. They just want their money…there’s not real understanding of long term planning or long term investment.

“They don’t know anything about sequencing risk, asset allocation or safe drawdown rates.

“For people who don’t know the rules, the freedoms has been absolutely designed to screw them.”

Lord likened insistent clients, those who demand a course of action against recommendation, to “little kids having a tantrum”.

She said: “As professionals, we know this is self-sabotage.”

Lord issued a called to the financial planning profession to do more to improve financial education, for example through articles on their websites, blogs or through social media posts, on the back of fears that, though some clients may have been given bad advice since the freedoms, all planners will be “tarred with the same brush”.

She said: “We live in a culture of claims. Can you imagine in two years, all those people bothering us about payment protection insurance, will say did you transfer your pension, did you take out drawdown.

“I think we have got a really big responsibility here that the clients are getting the best possible advice, but not just clients, its getting the people who think they know better, who can’t afford advice, or don’t want to engage with the advice community, to understand what the rules are.”


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. It’s about time people were treated and acted like adults. Buyer beware. If people blow their money they should be cut out of any future benefits that would normally be available via the tax payer.

    How is it in China people save more of their net spendable income than the UK? Because they know very well there isn’t a benefit system to fall back on.

    Lets stop taking on everyone else’s irresponsibility.

    • It is the advisers that are out to purely line their own pockets with advice fees and funds under management that are irresponsible.

      So called insistent clients only happen because the adviser bigs up the pros and ignores the downsides and their compliance departments want something on file.

      • You have clearly either had a bad personal experience with a (tied) adviser, or believe everything written on the press, because most (I grant you there are some) advisers are there to advise clients how to reach their goals and the best way of doing so – which from a pensions freedoms perspective could save clients £1,000s (even after their abbiser fees) in unnecessary tax and far improved investment returns. This is the value-for-money that advisers provide.

    • An individual’s NI payments cover the State Pension so the fact that they ‘blow’ other savings is entirely up to them and should not be linked….
      On the other hand why not remove the lifetime limit in return for loss of state benefit and develop an inheritable pension pot that removes future generations from reliance on the state. This would be a positive for the exchequer……

    • You can treat people like adults but that doesn’t mean they have the mental capacity to act like adults.
      Just look at the Trump election and the brexit referendum.

    • If you mean that people who’ve cashed out and blown their pension funds should be precluded from replacing the resulting lost income by way of means-tested state benefits, this is already the case, in the same way as any unvested pension funds or undrawn scheme benefits are supposed to be declared and then taken into account in assessing eligibility.

      A few years back I arranged an enhanced ill health annuity for a client who subsequently phoned to complain (sort of) that in the wake of his next assessment his state benefits had been correspondingly adjusted. All I could tell him was that that’s the way the system works and that, as part of his original assessment, he was supposed to have declared the value of his then unvested pension fund, which would have resulted in the amount of his benefits being reduced by the equivalent annuity. He was fortunate that, as a result of not having done so, the DHS didn’t impose a retrospective adjustment which, in theory, I guess it could have done.

  2. Being brutally honest, Pension Freedom, was a cynical, short term cash grab by George Osborne, dressed up as “giving people more choice”. The only thing on his mind, was the amount of extra tax HMRC would be able to collect, because of the amount of extra money being taken from pensions.

    What he clearly never considered, is that most people are financially illiterate and they think extremely short term. The long term cost to the country of pension freedoms, will be huge.

  3. If Governments have difficulty educating do you really think that the adviser community will be any more successful. Anyway it isn’t our job we are financial advisers not teachers. Yet again we have people with the view that we are social workers, teachers, confessors and goodness knows what else. Shouldn’t we just stick to our knitting?

    Anyway do we really want to deal with people that are that daft?

    The real answer lies in legislation. The legislators created the mess, it is their responsibility to sort it (but don’t hold your breath):

    1.Increase triviality to £50k
    2. If you need an audit you have to engage a regulated auditor. So if you want to access your pension you should have to use a regulated adviser and charges should be taxed (not on the HMRC sense, but in the sense prevailing in the legal profession).

  4. “As professionals, we know this is self-sabotage” The damage was done by the industry’s collective silence when Osborne announced this. There were too many marketing departments putting out messages of support to what on the face of it was ‘motherhood and apple pie’ and too few criticisms made public by the many industry professionals who could see this car crash of a policy for what it was.

    • Siz

      I was one amongst several who were saying from the very start what an awful idea this was. It was so transparently a ploy to rake in more revenue. An annuity drip feeds revenue – pension ‘freedom’ cascades it in. A pretty short term view, but then what’s new? All Governments take the short term view.

      • I recall saying this to colleagues in 2015.

        Pension Freedoms allowed the public to cash in there policies, (and spend the money) just before the elections.

        No only that but UFPLS was taxed at emergency rate before the elections, with refunds paid afterwards.

        The logic was glaringly obvious.

  5. Christopher Petrie 9th November 2017 at 6:59 am

    I’ve found that since people no longer have to buy an annuity at 75, regardless of whether they wanted to or not, and they no longer have a cap on their drawdown plan in the meantime then…..they have increased their pension plan contributions.

    If an “annuity” were such a great thing, why aren’t IFAs recommending those folk with small pensions put all their remaining capital into a Purchased Life Annuity? If you wouldn’t annuitise your savings and investments then why would you annuitise your pension pot? There’s no logic other than “we always used to do things that way”.

    • Depending on the size of the fund and circumstances it can (and very often does) make good sense buying an annuity with your pension pot.
      1. Many have significant assets besides and these represent market risk. Why add to that with your pension?
      2. Assuming you retire(or access the fund) at a sensible age (68 upwards. An annuity can provide a no risk cornerstone to your income. With good advice over the years it is hoped that the client (and partner) has a decent amount in ISAs – which pay a tax free income. Over and above that there are bonds that pay tax deferred income for 20 years. (Who will worry about tax when they get to 88 or 90 and anyway the bond can be assigned.
      3. Under drawdown if the holder pegs it the surviving spouse has the worry (and the expense of employing an adviser) to establish what should be done. With a joint life annuity – no worries on that score.

      Yes there are occasions in which drawdown will be the better option, but there are still plenty of cases where annuities still have an important part to play.

  6. We do not live in a “culture of claims”. We do however live in a culture of incompetence, lacking in education and in many cases “common sense”. The Government has driven pensions out as a savings medium. The tax benefits offset by huge increases of Govt Tax Reclaims from – Pensions freedoms ( which should be renamed Pensions Taxation. Auto enrolment is effectively National Insurance, compulsory paid for by Employers and Employees – with much the same lot who brought you Pensions Miss-selling ( or as I refer to it as Pensions Fraud. Now A J Bell refuses to pay out Income Drawdown, BT, Royal Mail, BHS, SWRBS and other Final Salary schemes are either insolvent or incompetent to manage them. Paying Trustees millions of pounds to pervert the course of Justice. No wonder people make the Choice not to join these pretentious – unsavoury, pathetic – pensions schemes with their high charges poor performance – and lack of commitment form their management ( IE CEO Chairman and Board of Directors – including their Head of Risk ?). The point behind the Law of Agency is that Tied Advisers are little worse than the insurance companies “Independent”, sponsored by the product provider – where the Piper plays the tunes and the advisers does the dance. It is referred to as Bias! Prior to the IFP becoming RIP the IFP preferred to charge fees for work carried out and they promoted this. Following the sponsorship of tardy insurance companies – that changed to the Percentage of amounts invested (e.g 3% plus 1 % or more). Such strategies keep the client in the dark – for the added benefit of provider and adviser (tied or independent or multi tied or..) Put simply nothing has changed ! Directors should be held directly responsible for fraud in any of its guises – and/or their ineptitude or incompetence – against consumers. These would be client outcomes – better service clear fees and better business models.

  7. ”Lord likened insistent clients, those who demand a course of action against recommendation, to “little kids having a tantrum”.

    An endearing way to talk about your current and potential clients, glad I’m not one of them

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