It is somewhat ironic that a Treasury-commissioned report into pensions and long-term savings should have been published in a week that saw such sharp falls in share prices.
While Ron Sandler’s report was stating that consumers are not saving enough money for their retirement, the same consumers were being told in newspaper headlines that pensions and other long-term savings plans were being hit by the falls in the stock market.
Now, almost a week on, the analysis pages of the Sunday newspapers that were devoted to Sandler’s report and his dissection of the financial services market are but a distant memory. The vivid and volatile reality of the stock market, however, is still staring consumers in the face: on Monday, the FTSE-100 index of leading shares plunged to its lowest level for nearly six years.
Sandler’s proposals for radical surgery on the design and sale of pensions and savings products may well be taken up by the Government and the financial services industry. In two years’ time, high fees and the practice of marketing savings products by referring back to past performance may well be eradicated in accordance with the recommendations in Sandler’s report. Indeed, consumers may also be able to select their pension or savings plan from supposedly simple to understand, ‘off-the-shelf’ products, without the help of independent financial advisers.
But the question is: will they? Some consumers have already had their fingers burned by ‘with-profits’ policies and the Equitable Life fiasco, while others have seen their parents slave away, stashing the recommended percentage of their annual salary into personal pension schemes in a bid to secure that comfortable retirement, only to find that their pension is not worth anything near what it should have been.
It is understandable that, over the past few years, a sizeable proportion of those who can afford to have put their money into bricks and mortar, as opposed to long-term savings plans that are generally dependent upon the vagaries of a stock market that is still trying to readjust to life after the dot-com boom as well as coping with the poor performance of the US economy.
Even if new, transparent products are developed by the financial services industry, cynical consumers will still take some convincing to invest more in long-term savings. With the Treasury and the Financial Services Authority each saying it is the responsibility of the other to tell consumers they are not saving enough – 20 per cent below what they should be, according Sandler’s report – it will fall upon the financial services industry to plough money into brand marketing campaigns to push the new-look ‘off-the-shelf’ products. But haven’t we been here before, with stakeholder pensions which have yet to capture consumers’ attention?