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Pensions solutions for policy makers and society

The pensions industry has seen significant change over the last 25 years, with further material challenges, both short-term and long-term, already on the horizon including the revival of the Pension Schemes Bill and its many implications.

To meet these issues head on, Eversheds Sutherland has today (12 February), in conjunction with research company, Winmark, launched a new report: The Future of Pensions.

The report acts as a roadmap for pension policy makers and society as a whole. It tackles the unique challenges currently facing future generations and provides innovative ideas to the ultimate pensions questions: How do we get people to save enough for an affordable retirement, and how can we provide better financial options for retirement?

The report includes an “innovation checklist” of ideas to ensure a better retirement for all, suggested by the senior pensions industry professionals who took part in the research exercise, and on which over 350 participants were then surveyed.

The report’s innovation checklist lists the 18 solutions in order of popularity, with the top five as follows:

  • Annual pensions statements that show actual annual income at retirement
  • Accelerated development of the pension dashboard
  • A savings and pension planning ‘rite of passage’ for young people
  • Extending auto-enrolment to the self-employed
  • A greater role for IFAs, through the introduction of safe harbour legislation

The innovations relate to the four principal themes covered in the report, which came out of the global legal practice’s research process:

  • The future of Defined Benefit (DB) – facilitating a “safe landing”
  • The future of Defined Contribution (DC) – better coverage, adequacy, consolidation and decumulation (converting pension savings to retirement income)
  • The future of long-term pensions: planning and collaboration
  • The future of pensions: engagement and communication

Francois Barker, head of pensions at Eversheds Sutherland, and Partner who commissioned the report, said:

“The Future of Pensions is a huge and urgent topic.

“By focusing on the four key themes identified by our report we have been able to better understand and suggest some innovative solutions for each, as well as capture and incorporate the views of our international colleagues on where the UK may have lessons to learn from overseas jurisdictions, and vice versa.

“The ‘innovation checklist’ of ideas makes for particularly interesting reading as these are some of the solutions, if correctly implemented, that will make the Future of Pensions a better place for all of us. Without a combined effort to tackle these issues by both government and society, whole generations face the threat of simply not being able to enjoy an affordable retirement.

“The pensions landscape remains in a state of flux but what is clear is that we need to transition to a range of new and effective models to ensure that pension provision for the future is adequate and fit for purpose – for all generations of savers, and all groups in a diverse society.”

FP PHOTO

Sam Sloma: Two must-reads for financial planners

If you had told me 10 years ago that not only would I be a chartered financial planner but that I would enjoy it so much I would be reading about the “science” of retirement and the “new retire-mentality” in my spare time, I reckon I would have asked you to kill me.

But it seems the lifestyle planning element has ignited a spark within me and, once the passion for what you do kicks in, you just want to learn as much as you can.

I have just finished The New Retire-mentality by Mitch Anthony, who spoke last month at Paul Armson’s BACK2Y conference. I saw Anthony speak last year and he was fantastic.

The crux of the book is that retirement should not have to mean stopping work and switching off one’s brain. In fact, there is plenty of evidence to support the idea that doing so has a negative impact on your life.

Advances in medicine and healthy lifestyles mean people are living longer and are far more able to work until they feel they cannot or do not want to.

The internet and progression in human connectivity have also meant that, instead of putting a finite date on one’s working life, it is now easier for people to phase the slowdown, to start new businesses or follow passions in their spare time.

Traditional ideas of retirement are changing and there is an element of responsibility on planners to make sure retirees understand they have options. It was an enjoyable, easy read and I would give it an eight out of 10.

The second book I want to recommend is Start with Why by Simon Sinek. While not specific to financial services, it is a brilliant book about understanding the “why” within your business.

Understanding why the business exists provides a fundamental foundation to build on, of which you only realise the importance once you have found it. Sinek gives numerous examples of business leaders, including high-profile chief executives such as Apple’s Steve Jobs, who have started with why, and how it leads to repeated success.

It is not difficult for a business to explain what it does and it is also fairly easy (though possibly more technical) to explain how it does it.

But very few businesses can clearly articulate their why. Why is it not about financial assets or profits? Why does your business exist? Why does it do the things it does? Why do customers really choose one company over another? Why are consumers loyal to some businesses, but not others?

Starting with why works across businesses of all sizes and across all industries. Those that start with why are more likely to achieve the consumer behaviour they desire through inspiration. And the people who follow them do not do so because they have to; they follow because they want to.

Now, the comparison between companies like Apple and a local financial planning business is not really a fair one. However, it does not mean we cannot learn lessons from these successful businesses. It is a huge asset to be able to look at your business from the ground up and have everything aligned to your why.

Start with Why is a bestseller and for anyone looking at starting their own business, I would say it is a must-read. I give it a solid nine out of 10.

Sam Sloma is Managing Director at Engage Financial Services

Govett PHOTO

New CEO of the Single Financial Guidance Body appointed

John Govett is vastly experienced, having worked in leadership roles across the public, private and charitable sectors including as Group Chief Executive at Ixion Holdings, a not-for-profit skills and employment group of companies, Managing Director of Surrey County Council, Shaw Trust Charity Board Executive and P&O Ferries Commercial Board Director. He has a strong track record of driving transformational change, delivering outstanding services and leading successful growth.

A deputy chairman of Basildon and Thurrock University Hospitals NHS Foundation Trust, he will take up his new post in October 2018. His appointment, for a four-and-a-half year term, follows an open and competitive recruitment process overseen by the Office for the Commissioner for Public Appointments.

The government is bringing together 3 well known and respected organisations, the Money Advice Service, Pension Wise and the Pensions Advisory Service to create a new Single Financial Guidance Body offering UK-wide guidance on pensions and money, and debt advice in England.

SFGB is a fantastic opportunity to improve provision of free and impartial money and pensions guidance and debt advice so that people can make informed choices about their finances. This is a challenging but rewarding opportunity to lead on improving financial capability in the UK.

Secretary of State for Work and Pensions, Esther McVey, said:

“I’m delighted to welcome John Govett as the first Chief Executive Officer of the Single Financial Guidance Body.”

“John has extensive experience and knowledge from across a range of public and private organisations which make him the ideal candidate to establish this crucial new body, heralding a new era of excellence for financial guidance and debt advice in the UK. I look forward to working with John.”

John Govett said:

“I am honoured to be appointed the Chief Executive of the Single Financial Guidance Body. The new organisation will become a leader in its field, where we will strive to equip those in need of help with the money and pensions guidance and debt advice that they need to engage confidently with financial services. The key for the SFGB will be to focus on those services our customers need, with a joined-up partnership approach with the wider industry.”

“I very much look forward to this exciting new combined service offer for the public and our staff.”

The chair of the Single Financial Guidance Body, Sir Hector Sants, said:

“The new organisation has a clear mission to help everyone manage their personal finances as well as their circumstances allow. My vision is of an organisation which is seen as transparent, accountable, effective and above all respected by all.”

“I am delighted that John is joining us and I look forward to supporting him over the coming years.”

More Information:

John’s most recent role was as Group CEO of Ixion Holdings. His career has been in transformational change, partnership working, delivering outstanding services and leading successful growth. John has worked in the public, private and charitable sectors, with previous posts including Managing Director at Surrey County Council, Shaw Trust Charity Board Executive and P&O Ferries Commercial Board Director. John is also Deputy Chairman/Non-Executive Director of an NHS Foundation Trust acute hospital.

The department announced Sir Hector Sants as the new chair of the SFGB in May 2018. Sir Hector spent his executive career in financial services and regulation, including as the Chief Executive of the Financial Services Authority, European CEO of Credit Suisse and a partner of stockbrokers Phillips & Drew. Since retiring from full time work, his focus has been helping people manage their money, and promoting a fairer financial system. Sir Hector is a trustee of Just Finance, a charity which collaborates with the Church of England to promote a fairer financial system, and a member of the UK’s Financial Capability Board. He is also chairman of StepChange Debt Charity, the UK’s biggest debt advice charity, but will step down before joining the SFGB.

The SFGB will replace the 3 existing providers of government-sponsored financial guidance – the Money Advice Service, the Pensions Advisory Service and Pension Wise – bringing together the provision of debt advice, money guidance and pensions guidance for the first time. A new, single body provides an opportunity to deliver a more streamlined service to members of the public providing easier access to the information and guidance people need to help them make effective financial decisions throughout their lives.

We expect the SFGB to be established as a legal entity in October 2018 and start preparing for its official launch in January 2019 when the body takes on its delivery functions and staff will transfer to the new organisation. It will have 5 core functions:

– the pensions guidance function – to provide information and guidance to the public on matters relating to occupational and personal pensions
– the money guidance function – to provide information and guidance designed to enhance people’s understanding and knowledge of financial matters and their ability to manage their own financial affairs
– the debt advice function – to provide members of the public in England with information and advice on debt
– the consumer protection function – enabling the SFGB to work with government and the Financial Conduct Authority in protecting consumers from detriment
– the strategic function – to work with others in the financial services industry, the devolved authorities, and the public and voluntary sectors to develop a national strategy to improve the financial capability of members of the public, the ability of members of the public to manage debt, and the provision of financial education to children and young people

The body will also provide advice to the Secretary of State on establishment of a debt respite scheme.

Paul Armson PHOTO

The lowdown on the BACK2Y conference

BACK2Y – literally, “Back to why [you do it]”, i.e advise clients – returns this year after its organiser Paul Armson’s alternative conference of the same name launched in 2014.

Last year, a room at the Birmingham Hilton Metropole just about held 198 for the one day event. This year, in response to demand, Armson (pictured) has booked more space at the city’s International Convention Centre, upped the number of speakers and is hopeful of 350-plus attendees.

The format of adviser conferences tends to be predictable: the latest practical information and opinions are imparted, mainly from providers, together with rehashed gripes and with a couple of motivational speakers thrown in.

The ‘industry’ wants advisers to give clients what it wants – product distribution. It’s time to wake up!

BACK2Y was an altogether much more emotive event.

The allure, according to those who went, was the promise of a space to share ideas at what the participants consider to be the vanguard of financial advice.

Speakers spoke evangelically of epiphanies turning them away from transactional advice, the practice of selling products to meet clients’ perceived needs so ostracised by today’s financial planning frontline.

‘Product’ is a dirty word at BACK2Y, and product providers, with their stands offering free stuffed animals and mugs in exchange for five minutes bending your ear about their latest ‘solution’, are banned.

The lack of corporate sponsorship is reflected in the price, with currently available tickets for this year’s one day event ranging from £297 to £347.

The conference does sell something though – professional elitism.

“Most advisers won’t get BACK2Y. But that’s OK. It only takes a few to start a revolution,” Armson said.

A Yacht & Two Pauls

Armson is a part-time financial adviser and CEO and founder of Inspiring Advisers, a coaching programme in which he teaches advisers “how to really succeed as a lifestyle financial planner”.

BACK2Y is an extension of the philosophy Armson preaches in his adviser training company.

“Inspiring Advisers can show you how to WOW! your clients in return for vastly increased fee income – and have a lot of fun in the process,” according to its website.

Mrs Miggins seeking advice on what to do with a pension pot of £50,000 – low, but sadly above the national average – probably isn’t going to be able to afford that vastly increased fee, so presumably only advisers with a large proportion of pretty wealthy clients need apply.

Not a criticism, but a reality.

Armson himself ‘semi-retired’ in 2005 at the age of 45 and split his time between advising clients and sailing “Spellbound”, his 60 foot Oyster yacht, around the world.

In between that he spent three years working alongside Prestwood Group’s Paul Etheridge, founder of the Institute of Financial Planning and darling of those who consider themselves to be the more progressive element of the advice world.

The two created the much lauded cash-flow modelling tool Truth Financial Planning Software.

No Real Value

Armson’s aim with BACK2Y is to marry up acting in the best interests of clients with acheiving professional nirvana for advisers.

“I wanted to create an event to bring together advisers who also believe that it’s all about the client and helping them get what they want,” Armson said of BACK2Y.

“It’s called BACK2Y because it helps take advisers back to what we should be doing for clients – providing peace of mind, financial security, helping clients live life to the full, helping them get and keep their desired lifestyle.

“That’s what proper financial planning is all about. And that is where the value is. It has nothing to do with this product is better than that product.”

Armson draws his battle lines on these terms; there is “no real value” in providing clients a product or investment based service.

“What clients really want to know is: ‘in return for your fees how are you going to make my life better?'” he said. That is probably a fair assessment of any exchange of hard-earned money for goods and services.

Armson’s point is that financial services has been lacking in this respect.

“The ‘industry’ wants advisers to give clients what it wants – product distribution. It’s time to wake up! Advisers are being paid by the client, so we have to give clients what they want – which isn’t products or investments.

“That’s why there are no product providers at BACK2Y. Just successful practitioners of proper financial planning, some of the best in the UK, if not the world, sharing their experiences, best tips and techniques and – just as important – sharing inspiration to help other advisers get their focus back on what really matters.”

The demise of commission brought on by the RDR shifted the power dynamic from advisers relying on providers for an income, to the other way around.

BACK2Y is a product (pun intended) of that change.

It’s “vibe” might not be to every advisers’ taste, but beneath all that, the fundamental premise of a conference delivered by advisers, for advisers, focused on financial planning, has to be applauded.

If you would like to find out more information about the BACK2Y conference, please visit: http://www.back2y.co.uk/

Pensions News – September 2014: budget reforms; legislation; public service pension schemes; and more

Welcome to the latest edition of Pensions News, which aims to help employers and trustees keep up to date with all the latest developments in pensions legislation, guidance and case law. This edition of Pensions News summarises the key developments from September 2014.

In This Issue:

Budget reforms: the announcement that the 55 per cent death benefits tax charge on pension funds held in a drawdown product at death or uncrystallised after age 75 will be abolished in April 2015.
The Pensions Regulator: information on new questions in the DB scheme return; and the publication of the staff determinations procedure that applies to cases where a decision is made by the executive arm of the regulator.
DWP: an announcement about the removal of the NEST restrictions, which also gives some indication on the possible timescale for the introduction of the system for automatic transfers.
Legislation: the coming into force of certain provisions of the Pensions Act 2014; the progress of the Pension Schemes Bill through Parliament and the publication of notices of amendments; and amendments to the draft updated IORP Directive.
HMRC: the coming into force of a statutory requirement for scheme administrators to be fit and proper for the role and the publication of HMRC guidance about this requirement; and the latest Pension Schemes Services newsletter.
Public service pension schemes: a policy note about the NHS pension scheme and Fair Deal; and an update to the directions on valuations and the employer cost cap.
Other news: the annual review of the Pensions Advisory Service; and the Pension Protection Fund’s latest Technical News publication.