It is clear from the ABI’s numbers that people are already embracing the new freedoms, but the manner in which they have done so initially clearly demonstrates how much more work is needed.
While Braun said the ABI’s figures were a “a testament to how well pension providers have adapted to the radical new approach to pensions”, McPhail had a slightly less positive view.
McPhail agrees that the numbers show that the pension freedoms are having their desired effect and investors are making full use of their new opportunities, but he said they provided one serious cause for concern.
The increase in transaction numbers is an indication that investors have a healthy interest in their retirement savings, he said but added: “the fact that so few people are shopping around shows that much more needs to be done. Politicians and regulators must focus on improving the pension withdrawal process; the goal should be for engaged and well-informed investors to be shopping around in a competitive market place; this is clearly not happening adequately at present.”
While, as McPhail mentions, much of the work must be done by politicians and regulators. The asset management industry does also have a role to play in improving the way it communicates its value to investors.
Indeed, this is very much the impetus behind the Investment Association’s recent release of a new Statement of Principles.
Speaking in the latest issue of Portfolio Adviser, IA CEO, Daniel Godfrey explained the biggest challenge facing the sector going forward is going to be articulating clearly, in as simple a way as possible, the value it adds.
He said: “Our biggest challenges are going to be responding to the questions we are going to be asked as we take a much more direct role in the financial well-being of millions of people. It is a great opportunity to grow but it comes with a great deal of accountability and a great deal of scrutiny.”
“We are going to need to have very clear answers about how investment management works, how it delivers value for money, what its governance structure is, and, increasingly, what role we play as people who control very big stakes in very big companies, what our responsibility is not just in terms of our clients but also society.”
For Williams, communication is clearly going to be key and that is not historically been an area of strength for the industry.
“It is quite timely that you have had the profesionalisation of the advisory market leading into a time when more advice is required. The path into retirement is less clear, less binary than it used to be and thus, the need for more advice is not going to diminish,” he said.
But, he added: this comes at a time when the image of the industry has been tarnished by the global financial crisis.
