Live long and prosper

Unless the financial services sharks get you first
Unless the financial services sharks get you first

Mr Spock’s farewell is looking increasingly more like a forlorn hope. We’re all living longer but scarcely any of us have got anything like the kind of money we need to look after ourselves (let alone prosper) in our 60s, 70s, 80s and 90s.

Aside the lucky 2% who have enough put by the vast majority of working adults in the UK (and in pretty much every other country) are looking at an old age where ends won’t meet. 32.9m people haven’t got enough put aside. I’m one of them.

This week Keppel&Co received its first “auto enrolment” letter from the pensions regulator. We’re not alone – over the next few months 1.3m other small businesses will receive the same letter.

ACT NOW - what a "nudge" feels like
ACT NOW – what a “nudge” feels like

(They need to work on their communications – this is essentially a “comply or die” notice not “we’re kick starting a revolution, come join us” nudge)

Between now and 2018 every small business in the UK will have to set up a workplace pension scheme for their employees. Most – 85% or so – currently have no kind of pension scheme at all.

“Auto enrolment” is what’s known as a “nudge”, though it might feel a lot more like a shunt. Millions of us, most of us, don’t have the savings habit sufficiently strongly. Many of us don’t have it at all. By making a workplace pension the default position for anyone in employment the Government is trying to alter behaviour on a mass scale. Steve Hilton talks about this nudge as being a “more human” way to behave. But some cynical attitudes and a systemic inability on the part of many players in financial services to be transparent and straight mean there’s a real danger that millions of people end up on the end of a very raw deal.

If we ignore it maybe it will go away?

some accountants are really hoping the legislation will be reversed....
some accountants are really hoping the legislation will be reversed….

I’ve been having a good look at how the financial services industry is gearing up to deal with this tsunami (1.3m businesses with several million employees all setting up schemes for the first time ever – at the rate of 50,000 or more a month) and there’s a lot to be alarmed about.

  • accountants are going to shoulder the burden of much of this big change and most simply aren’t ready. The big volumes of small businesses start “staging” in January 2016.
  • there’s an attitude emerging from within the the supply side which looks at least irresponsible and more worryingly immoral – namely that this is an opportunity to extract more money from clients by bamboozling them with how complex it is and foisting loads of complicated fee structures on them (in other words more bad behaviour from finance world – I was at an “auto enrolment” event the other day where the speaker – apparently an expert but someone I definitely wouldn’t buy a used car from – talked gleefully and without irony of “layering on fees”)
  • worst by far (aside from the unscrupulous attempt to cash in by pretending it’s all a compliance headache and hassle) is that employers, and employees, are for the most part not being offered a choice of pension scheme. The expert/used car man I saw simply doesn’t see it as a problem that hidden amongst the small print of what he’s peddling is an automatic leg into some dodgy (or potentially dodgy) pension scheme.

This is the next financial mis-selling scandal right here. Choice matters when it comes to how we’re going to live. Choice really matters. It’s not OK at all to withhold it or not offer it.

The Office of Fair Trading rightly have a dim view of the imbalance between the supply side and the buyer side when it comes to workplace pensions. There’s a lot of smoke and mirrors. A lot of scruple free people. And not enough transparency and choice.

In how many other areas of your life would you, could you accept not having any kind of choice? In where you lived? What car you drove? Or what food you ate? What bank you used?

You wouldn’t

Yet the people on the supply side of auto enrolment – whether they are middleware providers, end-to-end solutions, pension providers, payroll providers – think that it’s such a hassle, or such an opportunity to “layer on some fees”, that it doesn’t matter if the likes of you or me simply don’t get a choice over what pension scheme we put in place.

Any accountant with an ounce of professionalism will see the risk. Any business that cares a jot about its staff will know it’s wrong. Anyone who has workplace pensions as a ministerial responsibility will see it needs stamping out before it becomes a major problem.

There’s not a lot of time to put it right but there’s enough. This a fundamental shift in the way employers relate to employees, and in the way people behave towards saving for their old age.

This is a systemic change and it requires systemic leadership. We can’t afford to leave finance world to see it as yet another way to turn a quick buck. People’s livelihoods are at stake.

Finance needs cleaning up, needs purging of all the people who like to “layer on”, and we need to shout loud and long at the cowboys who are up to their old tricks.

The supply side of the financial services industry wields too much power. It’s time for us little people to take some back. After all, as Spock would say, the needs of the many outweigh the needs of the few.

 

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