The cost of freedom, £900m

The cost of freedom, £900m

In July 2015 it became clear that for one major provider, 70% of savers exercising their new ‘pension freedoms’ withdrew the lot in the first 6 weeks of the so called pension revolution coming into force.

Yet only 3% of those savers who contacted the firm had spoken to Pension Wise!

Panacea predicted that the ‘harvest outcome’ from pension freedoms would be “the next PPI scandal”.

The Government has been giving retirees the freedom to do what they want with their ‘hard-earned’ and those pension reforms and freedoms.

Their road can now be seen as fraught with some very clear dangers and many that are hidden.

Regulation and legislation needs to catch up with the retirement superhighway quickly as I suspect that those retirees who did their Lamborghini based ‘risk assessments’ may expect, but not get, public sympathy after doing something stupid.

Warnings were ignored and the rogues devising cunning plans to no doubt deny many the retirement they have saved for will not care at all about the damage and stress caused by their selfish, boorish, poorly regulated behaviour.

But perhaps the biggest cunning plan has come from HM Treasury who have, we hear, netted £900m in pension freedom tax. This is a third more that anticipated.

They say that wherever there is blame there’s a claim…….

Nationalise financial services?

Nationalise financial services?

We hear that The Competition and Markets Authority (CMA) has announced that energy suppliers will soon be forced to open up their consumer databases to allow competitor firms to offer those on standard variable rate tariffs better deals.

The CMA reckons that some 70% of the great British household ‘consumer collective’ could have been overpaying by around £1.7 billion a year or in CAM speak, consumers ‘could save up to £300 per year’.

That is assuming those consumers really do care, something that may not actually be the case despite the good work of the CMA.

There are many reading this who will have recalled the days when electricity and gas was provided by their supplier, then referred to as a ‘board’. Yes a board, not a company.

Power by way of gas and electricity was ‘homemade’ and the supplier was in fact the government by way of a nationlised utility. The same supply rational applied to water, telecoms, the rail network, health service, airports, air traffic control, the post office, coal, steel…..I could go on.

Without getting too political, nationalised management of utilities, key industries and services was not without its problems and it may be worthwhile to ponder the pros and cons.

And that ponder may induce more than a wry smile

Perceived Advantages

Benefits from economies of scale on the assumption that bigger is definitely better. That should see prices to consumers being relatively lower than if we had a number of smaller privately run for profit firms.

As they are owned, run and controlled by the government, this will stop consumers being exploited. The government can manage the economy better by ‘controlling’ the important utility and key industries. The government can invest money and make those services more efficient. Utilities and key industries owned and run by the people for the people take social costs (pollution, staff welfare, retirement benefits etc.) into account and the profits made go back to the ‘people’/ state.

Perceived Downsides

Low performance when ownership is in the public sector. Managers and employees do not work for profit and so their performance and efficiency has a perceived tendency to remain poor.

Lack of competition that is necessary for development and increasing innovation and production. Nationalisation historically has decreased the spirit of competition.

Favoritism.The management of nationalised industries will provide jobs to their politically favoured few because of government influence upon those state utilities and key industries.

Smiling wryly yet?

I am reminded of a now infamous George Best story about a waiter delivering an iced bucket of champagne to the late, great George Best’s hotel room.

On seeing thousands of pounds of casino winnings along with the then current Miss World both arranged very tastefully on the bed, the scene prompted the waiter to ask, “Mr., Best, where did it all go wrong?”

Some years later Best observed: “Perhaps he saw something in me that I didn’t.”

And that is the analogous point of this whole mess.

De-nationalisation needs regulation, nationalisation does not.

In light of the now completed FAMR exercise and last years FCA suggestion that consumers should be able to view all their lifetime pension savings in one place, would the creation of a ‘Pension Dashboard’ look like the first step toward a nationalisation of the financial services industry in the UK?

Just a thought that may have been missed in the deliberations?

Yadda Yadda Yadda

Yadda Yadda Yadda

A great article in Investment Week noted that “The Financial Conduct Authority (FCA) has said it is ready to intervene on the use of language confusing to consumers, if the industry does not develop a credible solution.

The regulator made the comments in its response to a report from the work and pensions committee which investigated the liberalisation of the pension market in April 2015. 

It said the use of jargon and technical terms in communications to consumers made it difficult for them to understand the information and needed to be changed.

The FCA also criticised the emergence of new terms such as UFPLS in the wake of the government pension reforms, which further contributed to the problem. 

It said it was committed to an industry-led solution to the problem, but stood “ready to act” along with government “if this does not prove forthcoming”. 

The regulator had been challenged by MPs on the pensions select committee on its rules for language used in communications. 

In response, the FCA said it had raised the issue of jargon usage in its smarter communications discussion paper last June and had challenged the industry to look at their language and reducing jargon”.

So, the best ‘interventions start at home FCA.

In December we heard that the regulator had  set out how adviser business models will be tested.

They were quoted as saying the guidance is not specific or exhaustive. then added: “Although a specific business model threshold does not currently exist, when assessing a firm against the threshold conditions as a whole, the FSA does ask for information about a firm’s business model.

“Therefore the revised threshold conditions, which now include a specific business model threshold condition, make explicit what is already implicit and as a result we believe our new business model guidance reflects existing practice.”

Who wrote this, why and someone, anyone, please explain what this means.

I think that this statement must qualify as one of the very worst examples of regulatory “W Cubed” speak- the unrealistic claim that your company can deliver whatever, wherever, whenever it’s needed to the regulator.

We also highlighted concerns some while ago that regulation and the various diktats and tomes that accompany it would benefit from being put into plain English.

So when we saw this from the FCA “Behavioral biases can render regulatory interventions aimed at addressing information asymmetries harmful” heads were banged on desks!

I thought it was worth sharing the above on this very topic with you.

In regulation understanding is everything and the starting point is guidance in plain, easy to understand non-“newspeak” English.

The English language today is being highjacked by some crazy versions of “newspeak” and this was a prime example of it.

We live in a society where we no longer have snow drifts – we have accumulations, we no longer have rainfall- we have precipitation, we no longer have fire brigade or ambulance- we have first responders, we no longer have customers- we have consumers.

Your views may well differ, if so, we would like to hear them.

Retirement Choices 2016 – Pension reforms and Industry Views

The Government announced at the 2014 Budget proposals that from April 2015 it would allow people aged 55 and above to access to their money purchase pension savings as they wish during retirement, subject to their marginal rate of income tax.

The development of the new reforms has impacted financial services significantly and almost a year on many retirees and advisers are sitting tight, waiting to see how new rules will affect the retirement marketplace before committing to any change to financial plans.

Additionally, in the recent budget the Chancellor launched a Green Paper to look at the pensions system as a whole, which could mean the system will be revolutionized further.

With the huge amount of changes going on, it is not only a challenging time for the adviser community but could also provide numerous opportunities for developing new business.

That is why we are launching the first FREE virtual event for financial advisers and paraplanners in the UK.

Retirement Choices 2016 – a virtual conference

On 25th February 2016 you can log in and hear from a number of keynote speakers and watch virtual presentations on issues surrounding pension reforms.

Live text debates will take place after some of the sessions, giving you the chance to put your questions to the experts and speakers to get real-time answers – ideal for people who shy away from putting their hand up and raising a point in front of an audience.


For more information about Retirement Choices 2016 and to register please visit our dedicated website

To register, simply type in a few details which will go to forming your virtual business card on the day.

When you enter the event on the day we will be there to welcome you to the show and help you get started.

What Price Peace of Mind?

Despite the freedom provided by Pension Reforms, it is still true to say that everyone has core expenditure needs that they need to meet which becomes their personal minimum income requirement.

Making sure essential bills are covered can be so important and payment should be met by some kind of guaranteed income whether from  the state, defined benefit pensions, or other means such as a guaranteed income for life plan.

Since April, annuities may no longer be mandatory but it’s true to say that they remain the only way to secure a guaranteed income for your client’s life and, as long as the right benefits are advised upon, can protect their spouse’s life too should your client die first.

Drawdown also remains a popular way for newly retiring private investors to take their pension income although it does not provide any guaranteed income to support these  minimum income requirements and can be susceptible to the high and lows of markets and interest rates. A blend of the two can of course provide security alongside the potential for rising income and flexibility over time.  Income drawdown may suit those pension savers who have already secured their essential income levels via another means. In many cases, this ‘mix and match’ or ‘blended’ solution of part guaranteed income for life plan and part drawdown can work well where the client has some capacity for loss and appetite to take investment risk.

If there is a shortfall of guaranteed income, after customers have taken their tax-free cash, a guaranteed income for life plan can bridge the gap and meet the client’s  requirements for capacity of loss .

In spite of the recent negative publicity, guaranteed income for life plans seem to remain good value (a point confirmed by the FCA in their recent occasional paper) when shopping around for the best rate and taking health and lifestyle into account.  The remainder of the pot can be placed into income drawdown where the money remains invested and income taken when needed to support any income required in excess of their personal minimum income requirement.

In later retirement years, where clients tend to have a lower attitude to risk due to the time required to recover from any early dips in the value of their investments however during the accumulation period, clients have more time on their side to plan for their retirement compared to during the decumulation stage when time may be a precious commodity if their investments have taken a fall in value. This sequence of returns can have a devastating impact on their pension fund.

The timing and sequence of returns on investments will be a key issue which needs your advice expertise. It is because of the possible effects of the sequence of returns that clients require sufficient capacity for loss to go into drawdown. As these two example show. A good sequence of returns leads to a good outcome, but a poor sequence of returns can be catastrophic.

There are a plethora of tools now available which can help your clients to establish which solution is best for them and with your guidance and advice can easily identify how much income they need to meet the essentials whilst taking into account other guaranteed income such as state pension, when payable.

Please visit our tools section within the Panacea Pension Reform site at or why not ask any of the provider sponsors to demonstrate their range of tools ?

Coulda, woulda, shoulda? At last an Ombudsman refuses to apply rules retrospectively

A breath of fresh summer air blew through the world of ‘Ombudsmanning’ when the Pension ombudsman Tony King recently made a ruling in relation to a pension ‘liberation’ claim where a transfer was requested one month before the Pensions Regulator issued guidance to providers about such cases.

When making his decision he said, “I cannot apply current levels of knowledge and understanding of pension liberation/scams or present standards of practice to a past situation.”

This decision should set a precedent and if followed by the FOS would remove the need for any longstop campaigns to continue.

This is the very bedrock of reasoned decision making where previous regulation and FOS considerations have fallen well short.

The FOS practice of applying a kind of ‘coulda, woulda, shoulda’ to decision making, often failing to give reasoned consideration to previous ombudsman’s rules in the adjudication process, will have seen many good businesses closed, liabilities parked with the FSCS and the resulting need to increase and apply one off unexpected unbudgeted levies placing unfair burdens on the firms left.

The decision from Mr King is simply one of fairness and common sense.

But is anyone listening at the FOS, over to you Ms Wayman?

Pension freedoms. Doing something stupid not knowing it is really stupid

I read with some interest and considerable concern the awful story of a unicyclist in Hoe Street, London E17 who collided with and got trapped under a route 210 London Bus. What followed was a fantastic example of people power from some 50 or so people who tried and succeeded to lift the bus of the trapped man allowing him to be taken to hospital, in a very serious condition.

Earlier in the same week two women were killed in separate London incidents involving trucks.

Cycling in London is not the safest of activities as many cyclists who have had a ‘near death’ experience with HGV’s would attest. Heavy goods vehicles are responsible for over half of all cyclist deaths in London, a third across the UK as a whole.

But, despite these numbing statistics, the E17 unicyclist is a perfect example of somebody doing something stupid while being quite oblivious of the fact that most others would see it as extremely stupid.

Cyclists and other road users are warned over and over again to exercise extreme care in London and other busy cities. Cyclists are told not to undertake trucks, especially at road junctions. Trucks have signs advising caution and many are now fitting a vast array of safety devices to warn the driver of collision possibility.

For many who have driven in London, especially in peak commute times, the car driver experience of cyclists use of the road is simply terrifying and I suspect it is a mutually shared state of terror for those on two wheels.

But the two wheel brigade in London (and I count my self as an occasional member of that club but not in London) test the ‘nine lives’ principle to the very edge. For so many cyclists, traffic lights are simply a suggestion, pavements and zebra crossings are their cycle superhighway if one does not exist and if you hit a cyclist, or they hit you as they weave precariously from one driver blind spot to the next, heaven help you.

I cannot help noticing that despite the rules of the road, defined by the Highway Code and the Road Traffic Act, attempting to provide a sense of order and a feeling of safety for all road users, it does not always work out that way. All because some road users do something stupid, unlike the unicyclist, knowing it is really stupid and expect others to take responsibility for their stupidity.

So, why am I rambling on about this?

Because the analogy of linking cyclists, HGV’s, responsibility and common sense could be applied to be safeguarding people’s retirement funds.

We now have the ‘fiscal unicyclist’ about to do something stupid, not knowing it is stupid because……..the government says they can ‘cycle’ but without any proficiency training, test or understanding of the dangers.

Last week it became clear that for one major provider, 70% of savers exercising their new ‘pension freedoms’ withdrew the lot in the first 6 weeks of the so called pension revolution coming into force.

Yet only 3% of those savers who contacted the firm had spoken to Pension Wise!

Panacea predicts that the ‘harvest outcome’ from pension freedoms will be “the next PPI scandal”. The Government is giving retirees the freedom to do what they want with their ‘hard-earned’ and those pension reforms and freedoms are about to present the same risk opportunity to investors and pensioners that Hoe Street E17 offered the unicyclist. Their road will be fraught with some very clear dangers and many that are hidden.

Regulation and legislation needs to catch up with the retirement superhighway quickly as I suspect that those retirees who are doing their Lamborghini based ‘risk assessments’ may expect, but not get, public sympathy if they decide to do something stupid.

Warnings will be ignored and the rogues devising cunning plans to no doubt deny many the retirement they have saved for will not care at all about the damage and stress caused their selfish, boorish, poorly regulated behaviour.

They say that wherever there is blame there’s a claim. If ever there was a time to urge caution it is now.

Which brings me back nicely to the unicyclist.