Pensions and palm reading

I’ll start with palm reading.

When I was a wee lad, I fell down the steps at my parents’ house and cut the palm of my hand with some broken glass. It left a visible inch long scar that I’m strangely proud of.

In my 20s, I went to see a palm reader at a travelling circus; ‘Mystic Megan,’ or something equally aliterate and amusing. She looked at my hand and then conjured up the memory that I “may have had an accident when I was younger.” To be honest, I expected a bit more conviction in her voice, given the evidence laid before her.

Anyway, I explained that I was paying to know my future, as I already knew my past.

Despite my request, she went on to ‘recall’ a variety of things that even a fool from foolstown could have proferred; that I had ‘been on a car journey, attended some kind of event, had a tiny bit of good luck recently.’ That sort of thing.

It would have been useful for her to predict that I’d spend the rest of my life working in pensions, but that obvious path was beyond even Meg.

She was rubbish. Full of hindsight, one might say.

Any ‘good’ fortune teller will of course look at the present to try and determine both what has gone before, and what can reasonably be predicted in the future. The present provides an ever-moving, yet pivotal moment in which to reflect and predict. In that order.

As we move steadily towards the widely heralded automatic enrolment ‘twin peaks’ of summer 2014, what can we tell from the events that have gone before that help guide us through the future?

Auto-enrolment

The past shows us that at least some of the complexities that faced larger employers will become obstacles for SMEs. Experience suggests even the smaller firms will seek – and pay fees for – help and assistance from advisers.

Governance

The Pensions Regulator has already set the bar for trust-based schemes and the DWP will undoubtedly ensure much of this applies for any auto-enrolment schemes going forward. Rightly so; the government must reassure itself that schemes are sufficiently well run that people can be placed into them, without prior consent.

Charge cap

We’ll most likely have clarity of any charge cap, active member discounts and existing scheme commission, based on everything consulted upon and said to date. Someone asked me recently if commission for workplace schemes would be banned. To be clear, commission is already banned under the RDR, the question now is simply how long will existing arrangements be allowed to continue.

Small pots

We should have greater certainty on how to deal with small pension pots as people move from job to job. The recent past here shows that we have widespread agreement on the problem, but little consensus on the solution. One way or another, we will need to break down some of the unnecessary barriers for people simply moving money from one good scheme to another. That much I think we all agree on.

Pensions Bill

The Bill will have exhausted most of its challenges and we will undoubtedly be closer to finalising the new ‘pillar one’ State Pension to remove many of the issues of means testing. History in this case only serves to show that this won’t stay the same forever, but at least some future proofing around the State Pension Age will allow a more stable system.

Retirement choices

We will be well advanced in our thinking, or re-thinking, on how people make good decisions at retirement. The primary focus will be ensuring people choose good and appropriate annuities, with work rightly moving quickly in this area. History – and geography – shows us that it will take a wider review of retirement options – including the systems working in other countries – to create a more appropriate environment for people to match income with outgoings in retirement.

So, the recent past shows us a little about what we can expect in the near future. It will all become clearer, presently.

The difference that will make the difference this time is the application of foresight in getting these changes right, and bedding down a more sustainable future for savers, employers, advisers and providers.

Mystic Megan would be proud.

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