9 August 2018
Parliament resumed on Tuesday and first up on the Work and Pension Select Committee agenda is its inquiry into pension costs and transparency. While Quilter agrees transparency is crucial, in written evidence submitted to the committee, it is calling on the government to ensure this is combined with engagement and education.
In the response, published here,Quilter flagged:
- The best way to achieve value for money is through face to face financial advice. Our research shows that advised customers are more knowledgeable and engaged. Quilter’s annual research of 50-75 year olds has consistently showed that those retirees who have seen an adviser even just once, had on average £7,000 more per year in retirement.
- Whilst the perception of value differs from person to person our research shows that 82% of customers found the financial advice they received at least ‘valuable’ and 62% of customers were ‘Extremely Satisfied’ with the advice they received.
- Technology has and will continue to play a crucial role in delivering education and stimulating engagement when empowering customers. The industry and the government need to do all they can to utilise technology and make it widely accessible, including encouraging and promoting the creation of the pension dashboard.
Andy Thompson, CEO of Intrinsic, comments:
“Savers now have much greater freedom to choose how they use their finances in retirement. The importance of these choices should not be underestimated, as the failure to make well-informed decisions could mean customers don’t realise the kind of secure and prosperous retirement they desire. An informed customer is one that is engaged with their savings; has the information they need and the knowledge of how to use it. Transparency is therefore crucial, but there also needs to be a focus on education and engagement.
“Part of the inquiry has zeroed in on if financial advisers offer value for money. Advisers play a crucial role in ensuring that customers make the most of every bit of their pension pot, in part because they save their clients from themselves. Investing is an emotive business, sometimes consciously, but more often than not subconsciously. Behavioural science has shown that we are prone to making ‘rash’ decisions, such as moving money to cash when markets drop. Advisers are there to be the steady the ship during the storm and will more than likely remind savers that markets go up as well as down.
“The value of advice can be a hard thing to measure in pure economical terms, because it’s not just about the money, it’s about the safety and security of having someone you trust help you manage your retirement savings. Indeed, our research shows the overwhelming majority of consumers get value from the advice they receive. “
Jon Greer, head of retirement policy at Quilter comments:
“The select committee posed the question of whether the government is doing enough to ensure value for money in workplace pensions. Through a combination of auto-enrolment and Independent Governance Committees, we believe the structures are in place so that pension pots grow substantially for every pound savers put in. When it comes to workplace pensions, the crucial problem is not value for money, but customer engagement and education.
“Auto-enrolment operates on inertia, not engagement, and whilst it has led to large gains in pension participation the same cannot be said about the size of contributions, in 2017 around 45% of private sector employees with defined contribution pension schemes were contributing less than 1% of pensionable earnings, and only around one in three employees were contributing 3% or more, according to the ONS. Over the next few years auto-increases will lead to a rise in the average amount employees place in pensions. However, we cannot be complacent. The Government needs to work more closely with employers, as they are best positioned to encourage employee engagement.
“It is also crucial that the Government puts appropriate funding into the Single Financial Guidance Body (SFGB) so people know where and how they can get the help they need with pensions, and sufficiently early in their overall retirement journey. However, with 750,000 people retiring each year, it is unlikely the SFGB will be able to cope with the anticipated demand, so the government and the SFGB should look to signpost when and how people can get effective and appropriate financial advice.”
Dean Bowden, chief commercial officer at Quilter Investors comments:
“Competition is an absolutely essential component of the retirement investment market, and we need to ensure that consumers get value for money when investing for a prosperous retirement. Engaged customers, with the support of a professional financial planner, are well placed to scrutinise their needs both pre and post-retirement and ensure their chosen investment solutions are delivering the right outcome.
“However, where levels of awareness and engagement are lower, we fear that customers may be at risk of sub-optimal outcomes. For example, there can be a temptation to assume that lower cost equals a better deal and that retirees may subsequently overlook the value of actively managed solutions, particularly in decumulation where we know active defence can be so important. Similarly, evidence shows that non-advised customers may be at risk of seeing their real terms spending power depreciate in retirement where they hold their pot in cash and we urge policymakers to focus on promoting engagement and education in order to help consumers make informed choices about their retirement investment choices.”
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Notes to Editors:
About Quilter plc:
Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.
Quilter plc oversees £109.3 billion in customer investments (as at 31 December 2018).
It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.
The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.
Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.
Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.
The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:
- The Multi-asset business is now Quilter Investors
- Intrinsic to Quilter Financial Planning
- The private client advisers business is now Quilter Private Client Advisers
- The UK Platform to Quilter Wealth Solutions
- The International business to Quilter International
- The Heritage life assurance business to Quilter Life Assurance
- Quilter Cheviot will retain its name
This press release is for journalists only and should not be relied upon by financial advisers or customers.
Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.
This communication is issued by Quilter plc. Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270. Registered in England.