Many years ago when I was a nipper, I was sleeping at a friend’s flat in the East End of London. We were woken at about 5.00am by a booming roar, seemingly just outside our bedroom window but in fact more than half a mile away.
My mate’s mum and dad were already up and getting ready for work so they went out to take a look. When they had not come back an hour or so later, we went to join them at the scene.
The huge booming sound we had heard was the side of Ronan Point, a new council-built 22-storey tower block in nearby Canning Town, collapsing like a pack of cards after a gas explosion.
Five people died and 17 were injured in the dreadful accident. A subsequent inquiry found the collapse had been caused by design faults, as well as poor workmanship.
Ronan Point marked the beginning of the end for 1960s modernist architectural certainties, whose central assumption was that the working classes could be squeezed and bent into whatever accommodation was created for them, regardless of their actual needs or desires.
More than 45 years later, it strikes me the key lesson – that you should never try to shoehorn human beings into structures unlikely to suit them – still has not been learned by either the FCA or the Treasury.
Last week’s announcement on the structure of the Government’s proposed pension guidance bears all the hallmarks of an abstractly designed and impersonal edifice rather than an organic system that adapts itself to the highly complex needs of new retirees.
The assumption seems to be that generic ‘thinking points’ set out by the Money Advice Service or The Pensions Advisory Service about issues to consider when reaching retirement will lead to potentially positive financial outcomes for people. Lob in a few techno-savvy points about telephone- and internet-based guidance, offer the sweetener of multiple face-to-face sessions and the hope is no one will question the fact that one crucial ingredient is missing from the mix. That ingredient is called advice.
Let us suppose that I am due to retire in a year’s time. I have a pension pot of £80,000, tens of thousands of pounds accumulated in various Isas plus a few dribs and drabs in a couple of semi-forgotten occupational schemes.
My spouse, who will retire three years after me, has some money in her Isa plus a surprisingly large chunk to come from a public sector final salary scheme she started paying into 35 years ago before leaving to have kids, only to rejoin when they left home. Both of us also have pension minister Steve Webb’s new state pension to look forward to.
In theory, we may not be too badly off. But we have other financial needs: our kids have jobs but are struggling to raise a deposit on a house; our own mortgage is almost but not quite paid off; and we would like to take a long-promised two-month trip to Australia and New Zealand when we stop work.
Either way, our requirements are likely to be completely different from those of our next-door neighbours, who may have provided for themselves far more successfully – or less well, who knows?
They may be expecting a bequest from their ageing relatives or have had children in later life who have yet to start university. Both issues need planning for.
Generic advice, let alone generic advice from a grotesquely expensive, staggeringly inefficient, risibly self-promoting organisation such as the MAS, just does not cut it, for them or for us.
Barring a minority – who either milk the system by opting to take repeat guidance until they have finalised their options or already had a damn good idea what they were going to do anyway – most people will drift in and out of their one-off generic advice sessions none the wiser, assuming they even bother.
Yet advisers are expected to pay up to 30 per cent of the cost of this service even though the ultimate gainers will always be providers whose products are used to create the complex combination of income streams and cash lump sums that future retirees are likely to need in old age.
What should have happened is that providers – and the Government – would have paid a certain sum to every retiree in the form of a voucher for, say, £100 that they could have taken to a number of accredited organisations, including IFAs.
Those organisations could have offered different advice options, with the generic online versions being totally free and the telephone-based or face-to-face ones bearing a cost. Accredited advisers could have operated in a similar way to now, to the effect that the first 30 minutes or hour of their time is free. Add in the voucher and you are on the way to buying a reasonable wedge of that adviser’s time.
Chuck in two or three hundred quid more and the basis for some solid advice, probably software-generated but still personal enough to be actionable, would have been possible.
Instead, we have a mishmash of a system that will not solve the needs of tomorrow’s retirees. Indeed, in my sleep I can hear another financial Ronan Point tower about to crash – but the number of casualties will be far higher.
Nic Cicutti can be contacted at firstname.lastname@example.org