WHILE no-one will argue with the plea in your editorial ("Money advice must earn its keep for pensioners", The Herald, July 22) in relation to George Osborne's announcement of free and impartial advice on personal pensions, the bottom line is that it is unlikely to succeed.
The finance industry is notorious for what I believe is called in business "commercial confusion". Between misdirection, small print and so on in the products being created, not to mention the likelihood of reservations to change the terms and conditions at any time after the contract is struck, no advice can be considered secure. We know to our cost in the recent past that the high-flying bankers didn't even understand the instruments they were trading.
What the Government should be doing is providing a practical way for future pensioners to be confident in the pension investment products that are available for purchase. This could be achieved in a number of ways.
l Setting up a publicly owned company dedicated to providing cost-effective pensions/ annuities along the lines of National Savings Bank;
l Facilitating the establishment of financial consortia of a size to provide economies of scale and to operate according to Financial Conduct Authority regulations;
l The Financial Conduct Authority being made responsible for evaluating every product which can be sold in this market and each one given a risk and return rating according to the nature of the investment fund, charges levied and penalties involved in the event that the investor wishes to relocate his or her investment. Future purchasers would therefore have some certainty and, desirably, the right to withdraw and transfer funds without penalty if the provider decide to change their rules.
These, I am sure, are only the tip of the iceberg in terms of alternatives. However, the key principle is that the prospective pensioner is not thrown to the wolves. There needs to be a legislative framework backed up by FCA enforcement powers.
It is only fair and proper for government to deliver in this policy area given that about 17% of the population is aged 60 and over and is on the increase proportionately. The scale of funds involved is massive and cannot be allowed to be plundered willy-nilly.
The nation has cause to fear Mr Osborne's flimsy offerings. On July 1, the Public Accounts Committee published its fifth report of the session which addressed the issue of the impact of infrastructure investment on consumer bills. Margaret Hodge observed that "a staggering £375 billion of investment is required to replace the country's ageing infrastructure". The consumer is expected to fund at least three-quarters of this investment yet "no-one in government is taking responsibility for assessing the overall impact of this investment on consumer bills and whether consumers will be able to afford to pay". In short, the Government has been taking a lackadaisical approach to the general population, as we have seen in our utility bills and this area affecting probably people's biggest investment after a house (and possibly more often the other way round) should not be uncontrolled.
Potential pension funds should be an election issue. This might help focus minds in the interests of all people in addition to the finance industry. Even in a controlled environment the industry will enjoy good returns.
John Walls,
50 Weymouth Drive, Glasgow.
THIS morning I heard Robert Peston say the "D" word on the Today programme on Radio 4. Having for years carefully avoided the word, are we now formally allowed to recognise that the period we have been through since 2008 was a Depression? We knew that technically it was, but the Government and the media assiduously abstained from using the word, preferring to describe it as a recession.
However, seemingly we are now in a period of recovery. How does that come about when real wages have fallen since 2008 and the stock market is only slightly ahead of where it was in 2007? In addition, with a public sector debt of nearly £1.5 trillion we are bound to have more public spending cuts. Indeed, most of these have already been decided upon but are yet to be implemented. If there is a recovery it is very fragile and talk of increased interest rates would be premature.
Tim Purdon,
18 Howard Park Drive,
Kilmarnock.
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