So said my 6 year old nephew during a festive game of Scrabble. Proud of the fact he had spotted my attempt at cheating (or as I put it, ‘testing his English’), he failed to spot the humour in his remark. That didn’t matter because he thought our amusement was merely in his accusation; we were all laughing for our own reasons.
The festive period is great for that; most people are in a good mood and most are off work. Some are uncharacteristically tipsy during the day and some – even young kids – sleep longer.
However, this lack of routine – this lack of absolute correctness in how things normally work – has consequences. We return to work with a greater shock when we get up in the dark that first day back. In my case, I write this blog during a trip to London. My first in over three weeks. You’d have thought I’ve never travelled before. I’m away for three days and I’ve forgotten half my cards, failed to pack my ties (I have three different coloured shirts) and have no cuff links. I’ll probably find I have the wrong toilet bag but I daren’t look. A bit of mascara and a hair pin would probably add to the open shirt and dandyman cuffs look when I present at this pensions conference thing tomorrow.
All because my routine was interrupted. Because things were slightly discorrect.
Lots of things are slightly discorrect (I’m going to keep using that until it’s accepted as a real word). The RDR isn’t quite right; it’s well intentioned and it’s taken the industry a long way in the right direction, but I doubt anyone would say it’s perfect. There are still issues; inconsistencies between treatment of commission between products, tweaks to rules, clashes with other rules, etc.
My favourite rule clash (you’ve got to have one) is under auto enrolment (AE), where COBS rules say someone in a GPP needs pre-sale information to ensure they are adequately informed in order to decide if they want to ‘opt in’ to the scheme, but the employer has duties under AE rules to enrol them and give them the right to ‘opt out.’ We should introduce another regulation to make sure members ‘shake it all about’ too.
But in the scheme of things, these are relatively minor issues. The real biggies in workplace pensions are:
- Getting another million employers and their ten million employees through AE.
- Making sure the 400,000 or so annuitants each year are making good decisions about their retirement (and not necessarily confined to an annuity).
- Making sure all schemes are good quality, even those set up many years ago.
- Finding a good, workable solution for people who build up lots of small pension pots as they move around jobs.
- Defining the ‘ambition’ to have greater certainty of retirement outcomes.
There are plenty of others, but that’s enough correcting to do for now. There won’t be a panacean solution for each of these issues; they will involve compromises and iterative change. But a degree of consensus is crucial. The success of AE thus far was predicated upon it.
2014 is the most important year for AE, in my view. We move into smaller employer territory with a much higher percentage of first time schemes with smaller benefit budgets and the first big peaks in activity amidst one of the biggest lists of regulatory changes I’ve seen for pensions in a long time.
But make it work and it may just start to gain its own ‘social norm’ momentum. People will routinely contribute to workplace pensions in the same way they take money from a machine in the wall, text people rather than speak to them, or believe the world is coming to an end when Wi-Fi doesn’t work. All stuff that was alien just a few years ago and now we take for granted.
That’s my view. 2014 can be a tipping point – a positive one.
But advisers reading this will be closer to employers’ views of AE; the masses staging during the summer. What do you think?