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Slander and Pickle show

So, now we know. The long-awaited Sandler and Pickering reviews have emerged from their long gestation period.

They have already got their nicknames. An IFA community up in arms about the threat from Sandler have nicknamed him “Slander” for the way they feel he has unfairly portrayed their industry and good old Pickering, who you thought would not want to hurt a fly, has been castigated as “Pickle” by officials at the DWP for leaving their bosses in the proverbial as they wrestle with the challenges he has set them.

Both nicknames say a great deal about the future of these reviews. There is no such thing as a magic wand in politics. The game is about balancing competing and often irreconcilable differences while doing one&#39s best to avoid a judgement of Solomon. In many cases, when this proves too much, it is often safer to sweep reform under the carpet and whistle nonchalantly while looking in the other direction.

While pension policy has moved very far up the scale in terms of its political importance, it is difficult to see how either of these reviews will have much impact on the deb-ate. I appeared on a number of political discussion prog-rammes during the week when the reviews were published and saw with interest how political journalists treated the story.

Their take on pensions is all about the Government – the 75p pension rise in the last Parliament, the failure of occupational pensions in this Parliament. There was no sophisticated, balanced approach to Pickering. Rather, the proposal to remove the mandatory req-uirement for spouses&#39 benefits (note – a suggestion that it be not mandatory, not abolition) was highlighted and various anonymous trade union spokespeople trotted out to knock it down.

This, then, will be the level of debate. If you are opposed to reform, rest easy. The Government is proposing a Green Paper in the autumn but it is highly unlikely that anything will be achieved anytime soon.

So, when one removes all the spin, what were Sandler and Pickering all about? Did they put forward sensible proposals that we can all cheer about? In many ways, my own nickname for the Sandler review would be Catmarks Two – the Sequel. Many of its recommendations are ideas that have been kicking around since 1997, when Rowan Gormley and Martin Campbell at Virgin Direct first started to campaign for financial benchmarks.

They were kicking at an open door and Catmarks were introduced. These have since proved to be a relative failure as they were not made mandatory. Stakeholder, by contrast, with its mandatory standards, has helped push down the cost of all retail pension products.

There are two principles that influence the Sandler report. First, most retail financial products are too complicated for the mass market. Active fund management, jargon and opaqueness have no place for the majority of consumer products. Second, the Government&#39s hostility to IFAs shines through. Commission is seen as anti-competitive and pushing up prices.

The Government will want to see the industry clean itself up without heavy intervention. It will assist, if it can, in lightening the burden of regulation where possible. The winners will be those companies that market overt vanilla products, companies such as Co-Operative Insurance Society, which is already marketing a transparent with-profits product as part of its stakeholder pension. The opportunity exists for companies – and their marketing directors – to start to sell “Sandlers” – products that they can tell the general public meet the Government&#39s requirements.

Sandler&#39s chief concern, however, remains commission-driven sales. He is not against commission in principle, only where he sees it restricts choice and competition. The most salient point he makes is that commission is set between provider and distributor when, of course, it should be set between distributor and customer. IFAs who want to thrive in a Sandler world should be thinking long and hard about how they can remodel commission so that the customer knows what he is paying and accepts that he is paying a fair rate and being offered the best products.

What has clearly motivated Pickering is equally obvious. The current rules for pensions are far too complex and overlapping. Further, they are prescriptive and leave little room for the exercise of common sense and judgement.

In many cases, Pickering is absolutely right. The biggest stakeholder provider, B&CE Benefit Schemes, has worked tirelessly to see some of the rules relaxed. This is because their target market – construction operatives, many of whom change address frequently and who do not save – are inadvertently penalised by regulations designed for face-to-face adviser contact.

To get pensions mass market, the rules need to be simplified.

Pickering wants to see a world where, effectively, three kinds of pensions co-exist – state, personal and workplace. It would be lightly regulated by a joined-up regulator which would anticipate problems and have the flexibility to solve them rather than having to issue further complex and prescriptive regulation.

Further, individuals should be able to “wrap up” all their different pension pots and take them in one pension at the end of their working life.

The next few months will give an early indication whe-ther Pickering and Sandler represent a brave new world or another worthy but failed att-empt to sort out the savings quagmire. I suspect there will be some incremental achievements but nothing on the scale anticipated by the authors of these reviews. Which is fine because we can all get excited when the Government ann-ounces another review in five years&#39 time.

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