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Joined-up thinking, not point-scoring

If politicians cannot find a consensus on pensions, then the industry must show the way

The intention of this article is not merely to point out the obvious – we all know there is a pension crisis. Even the politicians are at last taking this seriously. But pensions are still a theoretical point-scoring debate instead of a subject where there is a real consensus for positive change.

There is much expectation that the Pension Commission report will move the debate forwards. However, there are worries that Adair Turner supports the controversial Swedish model for compulsion. This would not be good for our industry, given the focus on price rather than quality.

Over the past few weeks, Australian senator Nick Sherry has been doing the rounds, promoting the compulsion experience of his home country. This has been received very positively by many but, unfortunately, we may already be set on a different road.

For all this political noise, there is no clear route that will improve the pension provision of the population at large. So I ask you to bear with me as I consider ways in which our industry could grasp this thorny issue and truly begin to make a difference.

One initiative which looks hopeful is the Scottish Widows report, What Women Want, published on October 19. I have always been opposed to marketing aimed at women. It invariably ends up being condescending. Did you see the FSA publication, Piling on the Pounds, issued in January? I still cringe. But there is no doubt that, when it comes to pensions, women are significantly disadvantaged.

This is not the place to retrace the history and consequences. But, for anyone want- ing to know more, I recommend the Widows report.

Although women are hardest hit by lack of pension provision, the situation applies to many men as well.

The question is, how can our industry make a dent in the problem while the political debate continues to rage? We need to focus on the world after A-Day, taking a fresh view which is not focused on stand-alone products – products which have a terrible reputation based on the mismatching of expectation and returns, inflexibility, poor tax incentives for those that struggle to save anyway, poor access, lack of advice and so on.

A single product sale will never be the answer. After all, for the majority of consumers, pension is a dirty word.

We need to develop clear communications featuring motivational messages which interest and stimulate consumers. Without this, people will not take action.

Access to appropriate advice is essential. This is not the place to enter into an IFA vs whole of market vs multi-tie argument. What is essential is that advisers are well qualified, able to recommend from a decent product range and have the client’s best interests at heart. Where trust exists between an adviser and client, there is real value in the relationship. This tends to be more important for women than for men.

Many of us are disappointed that A-Day will miss the mark in respect of closing the pension gap. So far, the main impact has been to create excitement for the wealthy. But when we look at the big picture, it does have advantages for everybody in terms of flexibility and wider choice. It also enables us to knit tax-efficient wrappers, such as Isas and pensions, in ways we have never before.

We should also rethink the incentives for saving. Why cannot rewards be based on the length of time that money remains invested, rather than locked to a tax band? What people need are simple savings within tax-efficient shelters, including funds which can be reallocated for different needs to cope with life changes and offer sophisticated options as the client demands them.

Our state pension needs to change to be fairer to women but it should also underpin private funding, not be seen as an either/or situation. Two regimes – the public and private sectors – should be working in tandem to provide for those who cannot and reward those who have.

I look to the future of long-term saving with renewed enthusiasm. With joined-up thinking and clear vision, we should be able to show the Government that we can provide planning solutions which make a real difference.


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