View more on these topics

Case for compulsion

The big question is, what is the purpose of retirement savings legislation and policy?

Is it to create tax breaks for the financially savvy and well advised or is it to provide savings for the people who in the main still do not understand that their National Insurance contributions are not a big savings pot but are used to pay the pensions of current pensioners?

In my 19 years in financial services in the UK and two years in New Zealand, I have seen it from both sides. The Australian model is compul-sion. It now has a thriving multi-billion-dollar stable industry based around this accepted principle. You get your net pay and your “super” is taken out. You make any kind of earnings and you have to pay super. New Zealand, like the UK, chose persuasion and in July 2007, KiwiSaver was launched. I left the UK to head distribution for the biggest player in that market – ASB, in February 2007.

Persuasion then. The deal was $1,000 from the Govern-ment just for signing up. Your annual contributions were (on top of the $1,000) matched annually up to $20 a week. This means that for a $1,020 contribution in year one, you end up with almost 300 per cent growth without any actual growth. There were methods of getting contributions out for house purchases for some savers.

There is no annuity industry in New Zealand. You get the whole lot as a lump sum. You are auto-enrolled when you change jobs and have to actively opt out (but that does not cover the owners of the 293,000 small businesses in NZ, probably accounting for 25 per cent of the working population, or the self-emp-loyed, another 25 per cent or more). Do I need to go on? Two-thirds of the people eligible to join a scheme with 300 per cent guaranteed growth in year one and 200 per cent every year thereafter still have not joined two years later.

In my first four months in New Zealand, I toured the country doing about 120 seminars, roadshows, workshops, TV appearances, etc, and I could not believe the negativity of the 2,000-plus businesses to whom I spoke.

First, they did not trust the Government not to change things (and they now have). Second, they did not under-stand investment outside of cash and property. Third, they did not understand the tax equity system called PIE which was being launched around savings.

When I spoke at the National Retirement Planning Symposium at Auckland University last year, my message was do not expect advisers to sell products with small commission, nor expect those who most need retire-ment savings to pay for advice.

What has worked to solve the retirement planning problem in the UK? PPs? Serps’ optouts? Section 32s? Sipps/ SSASs? Stakeholder? The list goes on. The evidence from Down Under is this – compulsion works.


7IM attracts over £1bn AUM

Seven Investment Management has exceeded £1bn of assets under management in its multi manager and multi asset class funds.

Mark Page: “A good time to be a European fund manager”

With European markets picking up in early 2015, Mark Page, Artemis European Opportunities Fund manager, discusses the ‘macro’ drivers and whether the improvements are sustainable. Largely driven by economic stimulus by the European Central Bank, European stockmarkets have performed strongly so far in 2015. Mark discusses the relative merits and sustainability of ECB policy with […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm