I have often wondered whether the Treasury select committee’s bark is worse than its bite. Former chairman and Labour MP John McFall (now Lord McFall) was always very vocal but Robert Reid’s’ comments in his blog, iPensions, please, struck a chord with me.
Reid suggests that at a recent Money Marketing event, McFall ducked and dived on all questions pensions and I am not surprised. During Lord McFall’s party’s time in office, it did little to help people manage their debt or encourage them to save. Labour’s list of failures was endless, from stakeholders to Isas to the banking sector. The pension timebomb has got worse – stakeholder pensions failed and their successors, personal accounts, aka Nest, was delayed and delayed.
It would not be wrong to say that a generation of workers missed the pension boat thanks to the lack of interest and urgency shown by the previous Government – a fact borne out by there being more than 20 ministers in charge of pensions in some shape or form during its tenure. Needless to say, pension apathy is still rife. A new report by Aegon shows that only 15 per cent of people are confident they will have saved enough by the time they reach retirement.
The Institute of Directors recently proclaimed that pensions were too complex and failing savers. It said this was why its report showed that more people were investing in Isas than pensions. The IoD reported the latest figures from the Office for National Statistics showed Britons put £22.9bn into pensions, such as a company scheme or a personal pension, in 2009 – a fall on £24.9bn in 2008 and £25.6bn in 2007.
By comparison, they put £44bn into Isas during the 2009/10 tax year, according to HMRC. This figure rose by £10bn to £53.9bn last year.
But dig deeper and there a more worrying statistic emerges. Savers are not investing in equity Isas in preference to a pension. Not in the slightest. They are investing in cash Isas.
The ONS figures show that of the £53.9bn invested in Isas, £38bn went straight into cash. History tells us that over time, cash is the worst asset to be in, given the eroding effects of inflation and over time the asset that delivers the best returns is shares.
Unfortunately, recent years have seen trust and confidence in the pension industry plummet to new depths. High fees and poor returns have turned many people off pensions, so the Institute of Directors is right in one respect – pensions are failing the British public.
But I doubt very much that consumers are turning to Isas to build a pension instead. I suggest it shows that the public has given up on the idea of having a pension altogether.
Who or what can rescue the situation? The critics seem hell-bent on making auto-enrolment a failure and Nest’s task looks a forlorn one already. And, although thought-provoking, I doubt that Reid’s vision of an iPension will do the trick either.
Pensions, as I said in my previous column, have a similar problem to the RDR in that it is a dull subject for most. But getting people, who would rather read about the goings-on in Towie or read about England’s progress in the Euro Championships, interested in money has been proved to work.
Step forward, Martin Lewis. As his new-found fortune following the sale of his Money savingexpert business for £87m proves, he has reached out to a new audience and given money matters mass appeal. If I were Steve Webb (or Nest for that matter), I would employ him tomorrow.
Paul Farrow is personal finance editor at the Telegraph Media GroupMoney Marketing