Happy Wednesday everybody, if indeed it is a happy Wednesday. I’m struck today by the cover of City AM, which isn’t usually required reading in the fine port of Leith, but which is when it looks like this. No doubt that things are tough, but your faithful Update is doing its bit to fight inflation and is keeping its price exactly the same at zero poonds. There are some unkind commentators who have suggested that a bit of shrinkflation in the word count might not be a bad thing, but to them I say: thbphthbhtbhff.
You know that saying that turkeys don’t vote for Christmas? I don’t like that saying. Turkeys don’t vote because they have no system of democratic accountability or representative government, they don’t have opposable thumbs or pencils or voting booths, and their brains only have 105,654,000 neurons compared to 21,000,000,000 in an average human, or 42,000,000,000 in your average Leith resident. If turkeys had all those things, they would have been bright enough to work out that the ho ho ho jolly fat man spelled death and would have developed severe countermeasures. Voting wouldn’t even be a thing.
I mention this because the phrase popped into my head when I read this piece and this piece on the pensions industry urging people who are struggling with the rapidly ascending cost of living to think twice before suspending contributions.
It is no surprise that an industry which relies on people contributing to pensions is against people not contributing to pensions. That’s a bit like saying businesses generally are in favour of making money and against losing it. No point in being grumpy about that.
At the same time it’s also not a great look for relatively well-paid people in our industry to be opining too publicly on what people right at the other end of the socio-demographic scale should be doing; whether they’re advocating caution or excoriating the industry for so doing. In general people are pretty smart at basic survival, and that’s what it looks like we’re down to.
The rationale the sector puts forward in suggesting to individuals they think carefully before suspending contributions boils down to this:
- Things might get better soon.
- You’ll have less money when you’re older.
- Your employer might stop paying in too and probably will.
- Asset prices are relatively affordable and you’re in danger of a deleterious decision which will significantly affect your ability to benefit from pound-cost averaging in the medium to long term.
OK, not the last one. But they’re thinking it.
The rationale for people stopping contributions is:
- I might be able to buy food and pay bills.
The principle of deferring consumption and gratification for later reward is one which assumes there is current consumption and gratification which can be deferred for that later reward. If there isn’t, then it doesn’t really work.
So people should do what they need to do. I think we don’t need the faux-outrage; the pensions guys are trying to do the right thing and if there are occasional tonality hiccups that’s not that big a deal. It would be better to work together to encourage people to do what they need to, but to remember to take up their pensions again when the pressure eases.
I think we do need the pensions sector to make a case to employers that even if their staff take a contribution break, they should continue with employer contributions, even if they don’t have to. Some businesses will find that hard, but of course if the individual kept contributing they’d still be on the hook, so apart from those unfortunate enterprises who won’t make it through this tough period, it shouldn’t be too impactful.
Doing what we do in this sector, talking how we talk, dealing in the way we deal, ends up in us being a very long distance indeed from those who avail themselves of our services sometimes. At those times it’s good to remember how fortunate we are and – if we are worth our salt – ensure that we act with respect for those in difficult situations, and highlight that because this sector is full of boring, technical, prudent folk, it will be here for them again when they’re ready. Unlike the turkeys, unless they really have been playing the long game.
- A hearty bump for our Edinburgh event on 5 October. The agenda is filling up nicely and as soon as I’ve got a minute I’ll update the webpage to reflect that. It’s going to be a brulllliant day and we would love to see you there. Free for advice professionals. Full details including streaming options here. And I just picked the bottle of whisky for the prize draw…
- Good piece from Lawrence Lever of Citywire on financial scandals here.
- And another from Tim Sargisson on Consumer Duty.
- And your music choice this week…well, sometimes it’s just a Floyd week. And this is one of those. So here’s Wish You Were Here live and if you can think of something better to do with six minutes and eight seconds I’d love to hear it.
See you next week