The broad savings and investment industry has been searching for detail ever since George Osborne stood up and dismantled our country’s approach to retirement savings on that weirdly exciting day in March.
I confess to not even watching the Budget this year, instead immersing myself in some pre-holiday shopping and expecting nothing much more than a nudging upward of the annual ISA allowance.
An insightful SMS from Lang Cat boss Mark Polson (not all printable here) and a quick gander at the share prices of the big annuity providers confirmed I was missing something seismic. And so it has played out.
Fixing the UK’s post-DB retirement problem (and its directly associated lack of engagement with money) was never going to be straightforward. But to me, a big first step was always going to be improved awareness of what money people had accumulated and an ability to tailor their income to their personal circumstances and objectives.
Sure, nothing will change overnight, but until we are able to embed a sense of personal responsibility for (and even pride in) their savings, we will continue to hit a brick wall. It may take a generation or two for the benefits to flow through, but a positive outcome will make the journey worthwhile.
Before that happens, and consumerisation bites, we will need to rely on our regulatory bodies to lay the tracks. Crucially, we cannot rely on the legacy industry to do the same thing, as evidenced by the reaction to Osborne’s speech.
As ever, much of the debate and the industry-led lobbying was self-serving and showed little regard for better customer outcomes; an endgame that feels pretty vital to our society as we hurtle toward a funding black hole in 20 to 30 years’ time.
There seemed to be a complete lack of acceptance that the open market option ‘project’ had failed and that in any event, a 30-year contingent investment in fixed-interest securities (that is, an annuity) might not deliver the best outcomes. How many actuaries would invest their personal funds in this way?
And then the genius suggestion from some (too many) quarters: don’t worry about creating new infrastructure to deliver the guidance guarantee, just trust the life industry! Yeah, like giving a kid the keys to the sweet cupboard – that’ll end well!
Last month’s news that the dissenting ABI voices have been heard is a great step forward. Sure, the guidance guarantee seems to be being rushed in and the infrastructure may be flaky, but far better not to jump from today’s vacuum straight into the next mis-selling episode.
Time will tell how all this plays out but we now have a once-in-a-generation opportunity to build the systems and the processes to show we can deliver the execution of the advice process.
If we can nail that, then we might finally see some people starting to trust our industry. Then it might just grow. That would be a big win. The flipside is hideous – let’s make sure we don’t go there.
