View more on these topics

Robert Reid: Lifetime Isa could torpedo auto-enrolment

ReidRob

Growing up, I enjoyed a varied diet thanks to a collection of aunts’ home cooking. One thing all the dishes had in common was their simplicity, which allowed those recipes to be handed down the generations.

When trying to engage people you should avoid messages that are too complicated. It is even more important to avoid the notion that the less wealthy members of society have uncomplicated choices to make or a limited range of options.

You only need to look at the number of Isas we have now to illustrate the need for simplicity. Throw in the pension freedoms and any idiot can see we are layering complexity upon complexity and that is far from smart.

What does all this prove? It proves beyond doubt that scenario planning is not practiced by those in the Treasury. We have piecemeal changes brought in by people who know nothing about life with limited financial resources.

Now the Money Advice Service is being reduced and Pension Wise and The Pensions Advisory Service are entering the real world you would be forgiven for thinking we might actually move forward. We probably would have had they not made matters so complex already. It has been proved time and again too much choice results in inertia.

All too often advice is sought by the Treasury and the FCA from those who are either conflicted or who simply do not have any connection with real life. I recall going to see Patricia Hewitt when she was economic secretary and her telling me poor people were mathematically challenged. I explained to her that was not the case and they simply had different priorities and timeframes.

If the idea is to engage the public, the Government needs to make things simple. It needs to make saving a no-brainer. To deliver a Budget where automatic enrolment is hit by the Lifetime Isa torpedo is so dumb it left me lost for words.

The focus of this Budget has since fallen on Iain Duncan Smith and the benefit cuts and exposed a strategy with more focus on keeping us in the EU than creating a viable savings culture. What we saw in this year’s Budget was ambition over new thinking. What followed in the fallout was, quite frankly, embarrassing.

March also saw the results of a Government review headed by Virgin Money boss Jayne-Anne Gadhia on inequality in the financial services sector. The gender bias it reported simply cannot be ignored.

I noted a comment that suggested the report supported tokenism, which only confirmed the person commenting had not read it. I have a message for those who see diversification and inclusion as a distraction: it is not, and you fail to attract a diverse client base if you oppose it in any form. We need to recognise  complexity and lack of tolerance will create a social environment where people take no action. That is not the marketplace we need.

Robert Reid is director at The Ideas Lab

Recommended

FCA interior logo 620x430

Providers back FCA action over flawed retirement defaults

Providers are backing calls for the FCA and the Government to give firms safe harbour to move customers out of legacy products with out-of-date default investment strategies. A report published by Standard Life’s independent governance committee earlier this week revealed the insurer wants to move customers out of historical default strategies but is being prevented […]

Old Mutual Wealth 2014

Private equity bidders circle Old Mutual Wealth

A number of America’s biggest private equity firms are preparing bids for Old Mutual Wealth, the Sunday Times reports. The wealth division is said to be the most attractive to buyout funds following the announcement the Old Mutual group will be split into four businesses. Firms including Advent International, Bain Capital and Carlyle are weighing […]

Ros Altmann
18

Ros Altmann: ‘I have been silenced on pension issues’

Pensions minister Ros Altmann says she has been “silenced” by former work and pensions secretary Iain Duncan Smith, particularly on the issue of women’s state pensions. In a statement published over the weekend following Duncan Smith’s explosive resignation, Altmann argues his departure is more about his stated position for the UK to leave the European […]

7

Nic Cicutti: Why we need to keep talking about the MAS

You may find this hard to believe, but some time ago I promised myself I would never again write about the Money Advice Service. My reasoning was I had said everything there was to say on the subject. After all, over the past four or five years I had already extensively described an organisation which, […]

9 October thumbnail

Johnson Fleming set to host webinar on auditing auto-enrolment schemes

With 23 auto-enrolment compliance notices issued by the Pensions Regulator, and an evolving legislative landscape meaning previously compliant schemes may now be in breach of regulation, now is the time to think about auditing your auto-enrolment scheme. Johnson Fleming is hosting a webinar on 9 October at 11:00 on how to audit your scheme to ensure compliance, avoid breaches and fines and overcome data issues.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Totally agree Robert, people will be put off taking any action.

Leave a comment