As a chartered financial planner with many years’ experience advising clients on pension policies, I agree with Stephen Gay’s comments in Money Marketing. Steve Webb perhaps needs to meet some of the individuals that I meet to see the reasons why they are not investing in pensions. High pension policy charges used to be an issue but this is no longer the case.
In my experience, the reasons why clients are reluctant to invest in pensions are as follows:
Scale: realistically, a fund of £100,000 will produce a pension of £5,000 a year. £100,000 takes a lot of funding and bear in mind this makes no allowance for the impact of inflation. The perception of clients is that they are beaten before they start and therefore do not want to commit.
Affordability: family budgets are being strained and there is little surplus cash available for investment. I find it frightening how many clients have no savings whatsoever other than perhaps a few hundred pounds in a current account.
Strings attaching: pension policies have a lot of strings attached to them and when explained (treating customers fairly), they are put off investing.
History: Maxwell, Equitable Life and other scandals live in peoples’ minds and make them very wary.
Education is the answer. I discuss with my clients how they might design a retirement income funding strategy. Typically, this might include pension funding, individual savings accounts, buy-to-let properties, downsizing the family home, the list goes on.
I believe my comments are the hard and painful truth and have no idea what the answer is but one thing is certain, it is not further reducing pension policy charges.
Chartered financial planner