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Here comes the backlash

Last week my chairman told me I would have to work until I am 90. He was making this rather alarming judgement on the back of the Sandler and Pickering reports – the reports that were supposed to allay our fears over the ever deepening “pension crisis”.

Rather than providing solutions, it seems the reports have only confirmed our worst fears. I suspect if pensions were a sexier subject capable of capturing our imagination, the younger generation would be trembling in their boots.

So, what exactly have Sandler and Pickering done for the great pension debate so far? Not a lot, according to senior Downing Street adviser Ros Altmann. The Government is no further towards motivating more people to save, she observed. The situation looks bleaker than ever.

Perhaps the older generation may be feeling a little smug. Every generation has had it better than the last. Even given the odd blip in the economy, the general trend really did mean as Harold Macmillan told us in the 50s “You&#39ve never had it so good.” But the words need to be juggled around to fit current reality. “You will never have it so good” seems more like it. Younger generations will struggle harder to obtain the same standard of living in retirement.

Putting my own concerns aside, the reports held serious implications for another group – the asset management industry.

Immediately following the publication of Sandler and Pickering, industry reaction was warm. Not glowing, but warm.

Given a few weeks to digest the small print, however, certain sectors are giving off decidedly cooler vibes.

Some time after they had initially welcomed the deregulatory thrust of the reports, fund managers began to hear the penny drop. “Hold on a second,” fund managers are saying, “we have been cut out of this deal”.

Well, that appears to have been Sandler&#39s intention. To suggest that fund managers are an unnecessary rip-off would be one reading of it. Not surprisingly, this suggestion seems to have caused a stir in certain ranks – and these ranks appear to be calling the industry to arms.

One detects a growing momentum of opposition to Sandler – a far cry from the qualified acceptance of a few weeks ago.

Forced to recognise the concerns of members, leading trade associations have all but swallowed their initial responses, with the IMA to spearhead an industry lobbying effort before the Green Paper in the autumn.

Enough is enough it seems. The fund management industry has taken constant criticism on the chin but Sandler seems to have twisted the knife and provoked a growing backlash.

Fund manager bashing seems to have gone too far and the fund manager intends to hit back. The fund management community appears to be abandoning cosy links with the Government to come out fighting. This change in tone may affect dealings with the Government for the rest of New Labour&#39s current term.

Sandler told us that managed funds have fared rather badly in recent times compared with their passive, tracker counterparts. He suggested that stakeholder products may be a good way around the “problem”, cutting out the middleman altogether.

To add to this, Ruth Kelly told Newsnight&#39s audience that stakeholder products were “safe havens”, failing to recognise the irony of the fact that her reassuring words were drowned out by the sounds of the crashing stockmarket around her. These “safe havens” would, of course, be susceptible to stock market volatility in the same way as managed funds.

The fund managers claim New Labour is missing a vital point – that active fund management is a necessary driving force within the stockmarket and that we would all be worse off without it.

So the initial cuddly responses to Messrs Pickering and Sandler have turned a little prickly. The fund managers are upset. The public are not reassured, nor driven to save. The innovative ideas do not seem wholly popular or indeed practical. As Money Marketing told us on July 25, Aifa director general Paul Smee believes the current debate “shows how much more argument there is to be gone through before Sandler&#39s prescription could be adopted or even modified”.

At best, the reports have thrown some new ideas into the ring but I doubt that anybody would describe them as radical or imagination, definitive.

Perhaps we need some more creative thinking. Perish the thought that the Government chooses to go along with suggestions that the retirement age is raised but there must be something more inspiring than Alan Pickering has come up with. The two most publicised aspects of his report – the call for an end to index-linking and spouse benefits – were hardly motivational.

With the exception of these two recommendations, Pickering was rather vague, with no mention of the annuities question. Once again, Governmental debate appears to be manoeuvring around one of the most fundamental problems with our system today. I must declare an interest here – Cicero works with the Retirement Income Reform Campaign – but I think we can safely say that the annuity issue was a glaring omission on the part of Alan Pickering.

Hopefully, Sandler and Pickering have widened the parameters to some extent but there is still much to be done. In the meantime, the fund management industry is preparing to lobby the Government in time for the Pensions Green Paper later this year. I sense that the Government may have to listen – and to act.


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