I am very pleased to see some sane comment appearing in the pages of your publication concerning 1 per cent charged products.
Judging by the fact that some perfectly reputable companies have already withdrawn from this market and others seem to be following weekly, I entirely agree with you that it is about time that the Government was told that something is indeed dramatically wrong- I do not have access to statistics but I know what is happening with our own practice in that the 1 per cent charged products have only been taken up by rich parents and grandparents making provision for children and have made no impact whatever in the market at which they were supposed to have been targeted.
There is undoubtedly a chronic problem of insufficient pension provision in the UK which can only be answered in one of two ways which are:
1: Compulsion or,
2: Making it sufficiently worthwhile for proactive pursuit of the target market.
There is no objective reason, in my mind, why there should not be a compulsory state fully invested pension scheme to which everybody must make a contribution at a minimal level but, of course, that proposition would go down like a lead balloon at a general election where, say, a 100 per cent increase in National Insurance contributions would merely be seen by a large proportion of the electorate as a further taxation burden.
Similarly, a compulsory contribution to any form of recognised pension arrangement would be viewed by a great many people in the same light.
It is therefore the problems of politics that have a lot to do with the situation in which we find ourselves now and I for one deeply regret the passing of legislation which made it illegal to compel employees to join a company pension arrangement as a condition of their employment.
When that was removed,it resulted in a great many people doing nothing at all except getting used to living solely for today on their income and having no ability to make decent provision for the future when called upon to do so because they are already tied in to, for example, big mortgage payments.
Much of the reports that have been published recently on how to deal with the pension and savings problem do not address the basic point that far too many people do nothing at all or very little towards saving for the future.
In the target market for improved provision, there exists an attitude whereby if you have £100 a month spare, you will not save it but use it for a credit arrangement in order to go and buy a car, a hi-fi or any other piece of consumer goods which you would use today to maintain your standard of living.
The fact that there are savings products with low charges will make not a scrap of difference to the attitudes of people in this particular group to saving money.
The advent of cheaper life insurance premium rates has not attracted this group of people suddenly to realise that state death benefits are more or less non-existent and that they should do something to protect their families.
It is most urgent that something is done to address this serious pension shortfall and unless compulsion is on the agenda, then it is imperative that we return to a situation where it is worthwhile for providers and advisers to promote personal pension business, which, quite patently, for a great many smaller firms it is not at the moment.
I suppose that fundamental to this issue is trying to readjust attitudes of those publishing lengthy reports that commission is bad when quite obviously it isn't.
Providing that any client is aware of what the charges are for advice, it matters not a jot whether it is paid by the client or by the life insurance or investment company from what the client has invested. Indeed, for a great many people and for a great many advisory practices, this represents the only practical option.
It should also not be beyond the technical departments of life companies to devise products whereby the charges can reflect the commission being taken by the adviser. Thus, there could still be 1 per cent products for those that want to do it themselves or for those prepared to pay a fee but other higher-charged products where commercial levels of commission have been agreed between the client and the advisers.
With some of the bigger companies, using a 1 per cent charge on products other than stakeholder, we have seen the level of service offered deteriorate seriously. What used to be available in 24 hours now takes two weeks, if delivered at all.
It is patently obvious that there is no money whatever and no commercial sense in offering 1 per cent charged products in a world where there is no compulsion and,as your editorial says, it is about time that the industry started telling the Government the truth instead of indulging in “Brown-nosing”.
Highfield Financial Planning,