The TUC’s Tim Sharp thinks the drive to individualism in pensions could force employers and employees to work more closely together
Given the government’s new-found enthusiasm for British values, ministers might want to consider how these apply to the pensions world.
I am pretty certain that “discussing one’s financial affairs in front of strangers” is not high on the list of national attributes. Indeed it seems that many people are not that keen on even talking to their partners about their retirement planning.
Yet, group financial guidance sessions are being as a potential solution to the problem the government has created with its hit-and-run on the annuities system that has given people more options on how to spend their retirement savings.
This suggestion is just the latest sign of how desperate ministers and those concerned with retirement provision are to devise workable models of financial guidance as it becomes increasingly apparent that the government is likely to dodge its previous commitment to fund high quality advice.
The challenge is to find a solution between inadequate cut-price generic guidance and extremely expensive personally tailored financial advice that could add significantly to pension scheme costs and ultimately be passed on to members.
Altmann’s take relies to too great an extent on the traditional structure of the financial services industry
One possible approach is that suggested by the ubiquitous pension fund manager-turned-campaigner Ros Altmann. Her paper Flexibility in retirement – planning for change adeptly sets out the changing nature of retirement in which some might choose to combine work and leisure in a gradual move into old age.
Even the Daily Express took a break from warning of the various things likely to send us to an early grave to trumpet her suggestion of working into old age to boost retirement incomes (of course only for those who are still able to work and can find a job).
The problem with Altmann’s take is that it relies to too great an extent on the traditional structure of the financial services industry. Much of her solution rests on funnelling people from generic guidance towards independent financial advisers.
Even looking at the use of technology to deliver advice or guidance seems to add little to the potential solution
Yet it is not clear that this part of the financial sector is trusted any more than the rest of it or, as is acknowledged in Altmann’s work, that savers are prepared and able to pay what can be substantial sums for advice. Nor is it immediately apparent that after a recent hollowing out following the abolition of commission payments and tightening of qualification standards, that the sector has the capacity or inclination to deal with more than just the wealthiest of customers.
Even looking at the use of technology to deliver advice or guidance seems to add little to the potential solutions. A large-scale study by Scottish Widows published last week found deep scepticism among savers about using approaches such as video calling to access financial advice.
What was largely missing from the Altmann analysis, as it has been from much government discourse on pensions, is the role of the workplace.
Her suggestion of financial advice being offered to employees as part of a “flexible workplace benefits package” will leave too many people slipping through the net.
For years, people have been increasingly left to plan and fund their own retirement. As a result many did nothing. Auto-enrolment ties employers into provision for employees’ old age.
With companies now no longer able to dispense with workers when they reach an arbitrary age, it will be in their interests to ensure that workers are well prepared for retirement.
It may be that the government finds that its effort to introduce more individualisation into the pensions system actually leads to greater partnership between employers and employees.
Tim Sharp is policy officer at the TUC