Robert Reid: Lifetime Isa could torpedo auto-enrolment


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