I want to move away from the retail distribution review. This does not mean the subject is no longer important and I heartily commend to you the article in last week’s Money Marketing by Nick Bamford, in which he called on all IFAs to take part in the debates over the RDR in the coming weeks and months.
My only comment on the subject this week is to observe that IFAs find themselves between a rock and a hard place. The problem, as I see it, is that some form of FSA-inspired change is inevitable.
The choice, possibly unpalatable to many, is that of forgoing commission in return for the independent designation being exclusive to whole-of-market advisers. The FSA might alternatively be inclined to say you can charge however you want but cannot call yourself an IFA any longer. As I say, a tough choice.
Anyway, enough of that for now. This week I want to talk about pension heroes.
In the past couple of years, we have all witnessed the long-running campaign by Ros Altmann to ensure decent compensation is paid by the Government to those whose employers’ pension schemes were wound up.
There is no doubt that even the current limited levels of redress now being offered to the 125,000 pension scheme members would be several times smaller without her selfless efforts on their behalf.
At this stage, it is impossible to say whether they will achieve everything they want. Peter Hain, the new face at the Department for Work and Pensions, says he is putting together a new package for those affected. Without Ros, there is little doubt that things would have got that far.
But there are others who in a totally different direction have ploughed the furrow on behalf of future retirees. One of those is Steve Bee.
For many years now, I have watched and read as Steve turned himself into a slightly jokey cartoon character, always willing to take part in any stunt that gave him and Scottish Life/Royal London a bit of publicity on the pension front. But underlying all the jokes, there is no doubt that he has a very serious message to tell. His BeeLines blog is required reading for anyone who is serious about pensions, in particular the proposed new Citizen’s Pension.
For a long time, Steve has banged on about the iniquities of the pension credit system, in which people who save find that the level of pension they get from their savings is effectively taxed at a 40 per cent marginal rate.
He has developed his argument into a full-frontal assault on the national pension savings scheme. In effect, Steve argues that the NPSS/Citizen’s Pension is fatally flawed in that by compelling people to save, it potentially places millions of low-paid workers in a situation where they will lose many of the benefits they would otherwise have received from the state.
By doing so, they have lost a portion of the income they could have enjoyed in the course of their working life – a pay cut in other words – without benefiting at retirement.
Last year, his column was the subject of a fascinating – if brief – debate on the DWP website, where the then pension minister James Purnell was forced to defend Government proposals from Steve’s stinging attack.
It would be fair to say that Steve tore Purnell to shreds. In a concluding piece, published by the Guardian, Steve said: “The fact is, the current system of means-tested credits for pensioners means that what we have in effect these days is a system that taxes savers.
“My argument, and that of a growing number of people from within our industry, is that such a system makes it very dangerous indeed to launch a national pension scheme utilising automatic enrolment and aimed at medium to low earners.
“If this ever does get put on the statute books, there would be a high chance that people could end up thinking they are saving for 100 per cent of a private pension but only getting 60 per cent of its value. If people were to be made aware of that fact before they sign up, I would guess that hardly anyone would join.
“And that’s the point really. This national pension savings scheme really mustn’t be allowed to go through as an advice-free zone. Consumer protection must be built in, just as it is with our existing pension system.”
I strongly support the creation of the NPSS but I also recognise Steve’s point. Without reforms that allow future pensioners to keep a far bigger slice of their savings without means-testing, the NPSS will disadvantage those who deserve better from the state.
It is to his credit that Steve has refused to let this issue die away. If the Government retreats even a little, it will in no small measure be down to his efforts. In my book, that makes him as much of a hero as Ros Altmann.
Nic Cicutti is editor of money supermarket.com. He can be contacted at firstname.lastname@example.org.