I have to say that Mr. Hunt routinely exposes us for financial hacks on a regular basis, as he did with the Mansion House pension reform this week.
Is he like the Scarlet Pimpernel? Deceptively mild-mannered and mostly meek, he suddenly puts on his cloak and sword when necessary, breaking through pension regulations and bureaucracy.
Indeed, he has developed a reputation for doing the unexpected. First, Edinburgh Reform, and this week’s Mansion House Reform.
We have to wonder what he will take out of his hat next.
Most of the prime minister’s speeches at the Manson House are relatively boring, calling for less public sector borrowing and more investment in the UK economy. You can see the image.
But that wasn’t the case with Mr. Hunt, I arrived at work on Tuesday to find a stack of press releases and documents from the prime minister on Monday night’s promises regarding Mansion House. Over 28 documents covering all aspects of pension and financial reform. A huge amount of information to digest. I can tell you that I needed a second cup of strong tea.
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Due to space limitations, I won’t go into all the reforms in detail, but you can read about them here and in other reports.
One of the key changes that received widespread attention was a ‘deal’ with the pension industry that promised to invest up to 5% of pension funds in UK infrastructure and UK high-growth businesses.
Most people would support this, but I’m still skeptical about how many of these promises translate into real investments. There is also the question of whether a pension fund’s investments should be ‘directed’ to a particular sector, regardless of the returns from that sector. To be fair, there are some benefits to investing in UK plcs, and pension funds that are patient with very long-term investments would probably be the way to go.
He also announced talks on a new consolidator of small pots and the end of the PRIIPs regime, replacing it with a more stylish post-Brexit one.
But one reform caught my eye more than others. His paper is entitled “Empowering Savers to Understand Pension Choices: Supporting Individuals at the Point of Access.”
This reform could potentially have significant implications for financial planners, most of whom we believe provide advice on pension funding.
While pensions have been making a ferocious comeback in recent times, deductions have become the de facto way to withdraw money from DC pension plans. Many planners consider decumulation advice their domain and are well positioned to offer advice on complex areas.
Hunt probably wants to change that. He plans to give pension administration boards and pension schemes a greater role in intervening at retirement and helping pension savers with their savings strategies as needed.
Many people simply withdraw money from their pensions and recklessly deposit it in bank accounts, often at long-term detriment, he said.
So he’s coming from a good position, trying to help people make their money work more and earn more in retirement. However, I need advice to do this and things get a little fuzzy at this point.
This document is open for consultation and we strongly encourage you to read and respond.
As it stands, the document could mean more business for planners, or it could mean planners being sidelined, perhaps the pension plan doesn’t want financial advice. or may be obliged to provide default or more templated decumulation options to large numbers of people who cannot afford to give financial advice.
It may be better than nothing, but it’s not as good as professional advice.
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Kevin O’Donnell is the editor of Financial Planning Today, where he has worked as a journalist and editor for over 30 years.
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