TCWU is mostly this week talking about pensions, to which we will turn in just a moment. But before we do, let us reflect in a not wholly irrelevant way on the trials and tribulations of political party leadership.
Only a week ago, in this place Mr Polson was drawn to muse on the difficulties of persuading party auditors on the merits of a camper van-based accounting system.
A week later and the deputy Prime Minister has had to resign for bullying his staff and Sir Keir Starmer, who has spent the last three years purging his party of antisemitism has seen one of his own MPs, the country’s first ever black female MP, literally write a letter to a national newspaper in effect dismissing the holocaust as not real racism.
So, for the avoidance of doubt and contrary to the impression some may have formed, it bears pointing out; not all politicians are thick as mince and many are genuinely motivated by an ambition to change the world for the better. They are human, some are good at their jobs, some are less good and this is true across the political spectrum; no party is immune from idiocy: for every Andrew Bridgen there is a Jared O’Mara and for every Dominic Raab there is a Diane Abbott.
Due to the nature of their jobs, they can’t always devote to policy issues the detailed analysis they deserve; they have limited bandwidth. Labour’s response to the Budget abolition of the Lifetime Allowance, vowing to reinstate it if elected next year, looked hasty and perhaps not the product of lengthy reflection.
The decade from 2006 to 2016 brought us pension simplification, auto-enrolment, state pension reform, pension freedom and the Lifetime ISA. After such a feast of reform there was no room for even one wafer thin mint and our attention was drawn away to such magnificent ventures as Brexit, holding the Tory party together, more Brexit, Labour in-fighting, more Tory in-fighting and then a pandemic. Savings policy has not been a top priority these past few years.
But as The Leopard observed, if we want things to stay the same, then things are going to have to change and into this vacuum has stepped the Institute for Fiscal Studies, who have launched a Pensions Commission style review of the UK’s pension preparedness. Its initial report does not make for comforting reading and points to inevitable political interference to come. There are aspects of the UK’s economy and savings ecosystem which should be giving us all pause for thought. If you want the whole story, I’d encourage you to read the paper, or if you work in PR then perhaps skim the exec summary.
Home ownership rates are falling, the population is ageing but life expectancy gains are not evenly distributed, we’re not saving enough (especially the self-employed), state spending on pensioners will keep rising and rising, and DC decumulation is fraught with risks we’re not mitigating effectively.
This means your clients’ pension freedoms, their accumulated wealth (including, possibly their homes), their inheritance tax privileges, their tax relief and tax shelters, none of these are guaranteed and almost certainly not all of them will last much past the next general election, whoever wins that contest (if anyone does).
The IFS is set to explore three questions:
1. Are people saving appropriately for retirement, in terms of both the amount and the form of saving, and if not, how can government policies help?
2. How should the state support people from late working life into and through retirement?
3. Do people require more assistance to use their wealth appropriately through retirement?
Consultations and stakeholder engagement events will occur. This will not be the only game in town, policymakers will be asking similar questions in other fora.
Concurrently and perhaps not even coincidentally, the FCA is reviewing the provision of retirement advice and the broader question of how advice and guidance are defined: How you engage with your clients, what is expected of you and what you are permitted (and required) to tell your clients, these too are set to evolve. Also, Consumer Duty is now just 100 days away.
There is an ebb and flow to life, nothing stands still and what seems to be permanent at the time turns out in retrospect to be just another phase. After a few years of relative calm in our world of saving and investing, it feels as if disruptive pressures are building. Keep a bag packed.
- You can find the IFS research report here.
- The FCA’s review of retirement advice is here.
And their advice and guidance review announcement is here.
Consumer Duty is, as we point out, only 100 days away. In case of emergency, break glass and call Mike Barrett he’ll tell you what to do.
- Congratulations to all the winners at the Professional Adviser awards and I hope the blurred memories of last night’s excesses are not too troubling.
- Meanwhile, the Vanguard galleon sails on, hitting 500,000 users, also worth noting 34% of their customers are aged 30 or under.
- The Podcat is up to 56 episodes and over 25,000 downloads, thank you for listening; the latest is on Equity Release, which like Professor Snape will play a critical role in resolving our problems whether we like it or not and very good it is too.
- After that less than cheerful conclusion, the TCWU musical accompaniment to soothe your troubled brow as you reflect on the vicissitudes of pension policy reform, comes from Pigeons Playing Ping Pong.
Thanks for reading,