Now is the time for advisers to really get behind pensions and champion the product to clients, says Andrew Glanvile.
Throughout my career as an adviser, I’ve been able to offer the best financial services product in this country, a product I’ve yet to see bettered in any other part of the world and a product available to nearly everyone.
That product is the pension.
“The past 20 years have created a generation of doubt and now we have to create a generation of certainty.”
It has been an extraordinary few years for pensions: the clarity demanded by the RDR, the new freedoms introduced in April and more recently, the Chancellor’s announcement of a green paper promising further radical reforms. These are all developments that give people so much more control and flexibility around saving for their retirement.
Endorsed by successive governments since the Old Age Pensions Act was introduced in 1908, pensions benefit from incredible tax efficiency, which underlines how the product has developed into such an unrivalled financial brand offering clients a fantastic proposition for their money.
There’s no better financial lifeboat that can meet life’s changes and where the investor can benefit from the best possible tax saving opportunities throughout a lifetime and with the added benefit of financial security for future generations. It’s almost too good to be true.
An exclusive brand
For pensions really are the most amazing brand and have stood the test of time over the past century similar to other exclusive brands like Bentley, Louis Vuitton and De Beers. But for the past 20 years, the industry has been suffering a hangover with the bad press with the widely reported mis-selling of pensions. Advisers have had to carry out reviews on past pension transactions as well which has only added to the misery.
Furthermore, pensions are still too complex. The tax issues should be simple but they are not – we have annual allowances and lifetime allowances that are confusing. However, the new freedoms are helping to unravel the complexities but the industry still has a long way to go to rebuild faith in the product.
The past couple of decades have created a generation of doubt and now we have to create a generation of certainty on pension products and emphasise the benefits of retirement planning. Perhaps, in order to make pensions more appealing to those under 40, we should start again and rebrand the benefits of pensions with a more personal name such as ‘my future welfare account’.
It’s time to start championing pensions
Every adviser needs to re-evaluate the brand, get back to basics and start championing pensions and get clients to really understand the product and the spectacular benefits they offer. A pension is without doubt the most effective way to save money because of the discipline of funding over the long term and, with a reasonable level of contribution, it’s likely to match an individual’s future objectives.
Pensions can adapt to an individual’s needs and circumstances and allows them to retain control on investment and benefits, even offering control on who the capital passes on to – it’s a wonderful tax-efficient legacy. At the age of 55, clients can decide on when they take their money to fund a lifestyle they cannot outlive as long as they seek the right management and advice.
As advisers, we need to emphasise the importance of careful management over a lifetime. Although the new freedoms allow money to be drawn down in excess of allowances subject to a potentially large penalty, it’s a good discipline not to do so because the options of remaining invested are so compelling - not only for safeguarding the client’s wealth but also for inheritance tax planning.
These are the simple yet powerful messages to be communicated to clients.
The concepts of pensions and retirement planning have been around since the ancient Greeks but the industry needs to urgently review how this brand is presented to the public. As advisers, we need to turn up the PR volume and reinvigorate the message to the benefits of long-term financial planning using the pension tool.
Pensions have always been a great product, but now the story is even better.