Fifty years on and the Editor has kindly allowed me to pen three articles – looking at the past, the present and the future – with a particular eye on the SIPP market.
I would list the dominant influencing features during my career as: technology, complexity, (inconsistent) government policy, (increasing) longevity and the evolution of Financial Planning.
When I started at Sun Life retirement benefit calculations were performed manually on a Monroe Calculator which are now museum pieces. Alacrity and dexterity in the use of a Monroe were KPIs as much as accuracy – all data and calculations were recorded on cards. The mainframe computer occupied a whole floor of the building and temperature control was crucial to prevent major interruptions.
I believe technology advances - which have accelerated rapidly over the 50 years - have been the major catalysts for change in the financial services world.
Disappointingly the pensions industry has – by and large - failed to keep pace with the developments and legacy issues remain a constant thorn in the side of many providers. This has contributed to the demise of the majority of life companies. Twenty years ago, I remember using a slide entitled “Where are they now?” which listed over sixty active life companies – now I would struggle to name ten.
I still have a booklet of just over 100 pages which covers in some detail all the features of the 1970 pension schemes tax code (“New Code”). Now, 50 years on, and one would probably need 100 volumes to adequately cover all the complexities and wrinkles of the current pensions legislation. There was a valiant attempt to simplify in 2006 – “A-Day” as it was known – but successive governments have failed dismally to acknowledge or remedy the complexities and the reduce the associated costs.
Inconsistent government policy on pensions has characterised the last five decades.
From state pension changes in the seventies to the personal pensions fiasco of the eighties and onto the aftermath of Maxwell and the smash and grab on pension schemes by Gordon Brown in the nineties short term policies have overridden any longer term strategies.
Some 20 years ago I was one of the first to call for some form of non-political pensions authority akin to the Bank of England monetary policy. I still believe there is a strong case for establishing such a body. The output from the Turner commission illustrates what might be achieved.
An example of the flip-flopping of pensions policy is the contribution limits introduced at A-Day which allowed well advised individuals to make tax-relievable contributions of around half a million pounds in one year. That seems extraordinary 15 years on. The inconsistent evolution of income drawdown is another example – albeit that it did provide me with two visits to Number 10 as part of the consultation on the original framework introduced in 1995.
The evolution of drawdown is linked to increasing longevity. When I started work a man retiring at 65 could have expected to have lived just over 12 years. Today that figure is nearer 19 years. The impact of this demographic change has been profound affecting the finances of state, public and private sector pensions and undoubtedly accelerating the move from defined benefit to defined contribution pensions.
The increasing complexity and the range of retirement options has enhanced the need for Financial Planning. My first experience ofFinancial Planning was in the very early days of the Institute of Financial Planning when I was fortunate enough to work with many of the luminaries in this field such as David Norton.
That opened my eyes to the benefits of good qualityFinancial Planning and led me to seek personal advice from one of the pioneers. He has now retired but his assistant who went on to set up his own family wealth business is now my adviser.
I am a huge advocate of holistic Financial Planning and regret that the financial advice industry has been tarnished over the years by scandals such as Barlow Clowes and Roger Levitt and more recently by a longer list of miscreants. Throw in the mismanagement at Equitable Life and RBS and more recently the pension scams associated with DB transfers and it is easy to understand why today there are trust and confidence issues.
I experienced first-hand the impact of mismanagement when working at UK Provident in the 1980s. However, UK Provident’s demise led me to join Provident Life (which became Winterthur Life) which became one of the first players in the SIPP market. My affection for “self-investment” stemmed back to the seventies when I worked at Sun Life who were one of the pioneers of small self-administered schemes and sparked an interest that has never waned.
I will have more to say on SIPPs in my next article but over the years my experiences with various providers have taught me several lessons – not least that timing is all important. In 2001 I was running the leading SIPP administrator Personal Pension Management Limited (PPML) when a failed MBO led to its ultimate demise. A J Bell, James Hay and others picked up some of the pieces and showed what might have been!
Despite that personal disappointment SIPPs have remained a vital part of my business life and I have watched with genuine delight the growth in the market over the last 30 years.
John Moret is principal of MoretoSIPPs consultancy and one of the UK's most experienced SIPPs experts, commentators and speakers. He has worked for Suffolk Life and several other SIPPs providers. He is chair of advisory business Intelligent Pensions and CX insight business Investor in Customers.