Combining two seemingly unconnected policies could radically change access to savings advice.
Earlier this month I ventured out of the office to interview people on the street (or sitting in the sun on Clapham Common as it happened) about pensions. The vox pop exercise revealed a complete lack of knowledge, trust and engagement with pensions particularly among the younger generation.
No surprises there: the question of how to engender higher levels of engagement in pensions is something that has been debated for years before I was even born (yes, I am a millennial). So how do policymakers get the masses engaged with their pension and taking the right steps towards the financial planning they need?
Step in the right direction
Positive noises were coming out of the government last month, with the Treasury’s consultation on allowing people to take £500 from their pension pots before they retire, to help pay for financial advice.
This shows the government is moving in the right direction and the seeds of generating mass market involvement in pensions are there. However it cannot do all the heavy lifting needed to encourage the mass market to sit in front of financial planners and organise their retirements.
The £500 allowance is not the only engagement scheme the government has come up with this year. There was also the announcement of the pensions dashboard in the Budget, the purpose of which is the creation of a digital interface, where people can view all their pensions in the same place.
Glynn Jones, divisional director of national advice firm LEBC, said there could be difficulties policing the pensions allowance (the Financial Conduct Authority has already raised the possibility of it being used for scams) and with making sure people spend the £500 on advice, as well as questions about which pot the money should be taken out of.
These difficulties, says Jones, could be solved by the dashboard. It will, it is hoped, keep all of a person’s pension data in one central spot, meaning it is easier to select the pot the individual wants to take the £500 out of.
The dashboard could also be a signpost to individuals for the £500 allowance for advice, as it could remind them they can do this, he added.
‘I think the two policies fit together so well,’ says Jones. ‘And I believe that with them we will see an individualisation of pensions, with a move towards individual’s pensions rather than group pensions, as they won’t be based around the company but around employees instead. With the development of the [dashboard] technology people may not have to have a proliferation of pots.’
If people are able to see all their different pension pots in the same place, and can use this dashboard to help with the process of taking £500 out to pay for the advice they need on these pots, this could be a significant step towards more pension engagement and action.
While the £500 allowance and dashboard will not radically change the advice landscape on their own, combining the two policies may go a long way to changing people’s attitudes towards advice and retirement. Even those millennials on Clapham Common.