PANEL
Chair: Chris Parrott - Pensions Manager, Heathrow Airport Limited
Stephen Bowles - DC Investment Solutions Manager, Schroders
Simon Chinnery - Managing Director, Head of UK DC, J.P. Morgan Asset Management
Jamie Fiveash - Director of Customer Solutions, B&CE
Ann Flynn - Head of Corporate Marketing, Standard Life
Robin Hames - Head of Technical, Marketing and Research, Bluefin
Julian Lyne - Head of Global Consultants & UK Institutional, F&C Asset Management
Philip Mowbray - Head of Product Risk, Barrie & Hibbert

Chair: The first thing we need to talk about is auto-enrolment – we are no longer in the land of theory; auto-enrolment is here. The one thing I would say from the very outset as an end user is that we are in danger of making DC ever-so complicated – which is a shame as one of the reasons employers originally moved away from DB was because it had become ever-so complicated. What are your experiences of auto-enrolment so far?

Hames: So far our experience has been very positive. We are administering and working with Morrisons on their cash balance scheme and they have now gone through their staging date and that’s gone very well. We’ve actually seen over 10,000 opt-ins from the existing workforce who hadn’t joined a pension scheme previously. Of course, the fact that it is a cash balance scheme means that they didn‘t even have to be auto-enrolled until 2017, but they chose to be and I think a lot of that is down to the education programme that Morrisons carried out from quite an early stage. They weren’t necessarily talking about pensions but talking about how employees can make savings, improve their net household income through a variety of things, whether it is changing a supplier of gas or whatever, to get people into the mindset of saving first of all, and then they began communications around the pension scheme itself.

In terms of the clients who are still in the preparation stage, the real issue is about data. It’s all about quality of data, transferability of data, both ways – if you get your data in order you’re well on the road to preparing for auto-enrolment.

Fiveash: We are also seeing a positive response in the media largely and I think that is important to increase confidence in pensions. Our first stager was in November but is operating three months postponement – most employers tend to be doing that so the experience of any large employer for us hasn’t really happened yet. We have also had a few early adopters.

One thing that continues to surprise us, though, is just how open the regulations are to interpretation. We are still finding things out – the number of options that employers have, the things that they can do within the regulations and so on – not everything is written down so it’s a learning experience. We’ll all be on a steep learning curve for the next six to nine months going forward.

Lyne: What has being really quite stark is the distraction that auto-enrolment has been; the time and energy that has been put into auto-enrolment from the pension schemes’ standpoint has been significant. The focus on everything else has not unreasonably been reduced. We are having conversations with schemes and while they may be interested in what we are saying, their primary focus is auto-enrolment at the moment.

Bowles: We did a snap survey and only 25 per cent of the respondents were using auto-enrolment as a reason to look at their investment design, for example. This isn’t surprising but it’s a little bit disappointing because we are going through quite an extended period where people aren’t focusing on a number of other important areas. That will change in time but there could be a price to pay for that in the long-run.

Mowbray: One issue probably driving that is the consumer focus. Frankly there are now politicians and regulators whose job it is to make sure auto-enrolment isn’t a disaster. Some of the ideas coming from Steve Webb, such as defined ambition, Nest constraints and so on, definitely have a consumer focus which probably hasn’t really been there historically.

Flynn: From a provider perspective we had our first stager just under two weeks ago, which was BT, which was of course a significant client. Interestingly they have always used contract of employment auto-enrolment anyway, so they already had a fairly high take-up rate on the main scheme, but they have also used Nest for a part of their population, so it is a hybrid solution. So far the opt-outs aren’t high and again I think that is to do with the communication and education that BT has been using in the workplace. So that’s one success story. We have got a few more to go yet but we are seeing different behaviours among the employers we speak to and contract of employment is definitely growing in preference – many employers want to make use of that approach and are not going to wait until staging to auto-enrol all eligible employees.

Chinnery: How far do we think this will trickle down before it gets to chaos? These are the very largest companies which you would expect to be organised. What about the rest?

Fiveash: March/April next year provides the first significant challenge as most providers are going to see the biggest influx of companies although most, like I say, are operating postponement so it might be three months on from that. That’s when providers will begin to be tested.

Flynn: We have around 75 stagers in the first half of next year, and these are significant companies, but a lot of them are already starting this process of getting people in by contract of employment. That way they will have a much smaller population to auto-enrol at staging date. Obviously their advisers are working with them to help with that.

Chair: Are you starting to see concerns about capacity?

Flynn: It’s certainly something coming through in the RFI process in terms of companies that are considering a complete restructure to DC and have concerns about capacity. The first thing we did in terms of our auto-enrolment planning was to model capacity out to 2017 based on our existing book but also our plan in terms of acquisition, and so from a provider perspective we’re relatively comfortable that we can deal with 60,000 auto-enrolees going on the books in one transaction which I think is quite a significant scalability. And the fact that BT has now gone through the process and it’s all working gives us great confidence. But I do think there is a bit of nervousness in the market around capacity.

Hames: We are definitely seeing providers already starting to become much more choosy in terms of the underwriting of schemes they are prepared to take on. Dare I say, even those who might have originally positioned themselves to take all comers, we are finding are now possibly turning down up to 50 per cent of employers who are talking to them. The providers of course will have that luxury that Nest doesn’t have of being picky pretty early.

The problem that the providers may well face is come 2014 and 2015 when a lot of companies who have schemes that have been looked after by a local IFA suddenly find their IFA has departed the market post RDR – those providers are going to have very large books of orphan clients where suddenly it’s sat with them to do more than simply just take on the administration role. Those clients are actually going to be picking up the phone to, say, Standard Life and saying “I’m a client of yours, my IFA has told me that they aren’t prepared to service me any more because I am not prepared to pay their fees... help!”

Chair: We touched on Nest and there is a question on the agenda around the constraints that were put on Nest and whether they should be removed. Any views on whether they should? From my perspective I think they are a scheme just like any other and, OK, they were put in as the scheme of last resort, but I think the way the market has developed means they are as much a player in the market as everybody else and to give them a disadvantage commercially I don’t think is fair.

Fiveash: I think the question I would pose is why do we need to lift the restrictions? From our experience of the market most employers at the moment can get access to a good quality scheme and that is the most important thing. Nest has an important place in the market and will definitely be needed when we get to the hundreds of thousands of small companies. It’s sensible to keep the restrictions under review but not yet. I think the appropriate time would be maybe in a couple of years’ time because we really do need Nest at the back-end when we get to the micro companies – anything that could inhibit the success of auto-enrolment I think we need to look at.

Hames: I have come full circle on this. Originally I was very much of the view that it shouldn’t be lifted and that it helped Nest to focus on its target market in its development. But I now think that, given the concerns that even some larger employers may struggle to find a commercial enterprise prepared to take them on, the argument for maintaining those constraints is becoming harder to justify. Some employers will go for a split – a two provider solution – but a lot will want a single solution. If Nest still has the contribution constraint, it may prevent some employers from having a single solution for their auto-enrolment. With ‘pot follows member’ the transfer constraint seems an odd one to keep now, therefore it is difficult to justify keeping these constraints.

Chair: Nest is no longer what it was set up to be. I believe that Nest has become something else just because of the way the market has developed and probably will develop over the next couple of years.

Lyne: I think certainly when it first came out Nest had a clear and distinct role to play, but things have changed and evolved and the danger is that if you don’t have a review today you’re constantly going to have this debate in the background. It is important that its role in servicing the small and medium sized scheme is reinforced but my sense is that the market has moved on and it is right that we look at Nest’s position. If you think about the challenge we have as a country on pension provision, to not make sure that we are actually operating efficiently across all pieces – from Nest to trust arrangements and GPPs – would be doing a disservice to the people trying to save for an appropriate pension.

Flynn: I think employers need to consider discrimination in terms of offering only Nest to certain populations. It hasn’t registered that strongly yet but when you look at these hybrid solutions that one group of employees, for whatever reason, are allowed which offer a much more flexible approach but other employees are very much constrained, potentially it could start to raise some issues around employment law.

Fiveash: A loan of that nature should have restrictions, because it’s not available to all. The restrictions were put in place to focus on a certain segment of the market; so if they were removed the question will be: how will Nest’s involvement in the market be controlled? A state-funded provider would create unfair competition the other way.

DC versus DB
Chair: Moving the discussion to wider DC provision, I’ll be the first to hold my hand up and say I have sat in trustee meetings where we have spent three and a half hours taking about DB and about five minutes talking about DC. DC has never had a fair run but I believe the focus is now changing – we are seeing more DC-focused sub-committees, for example, which report back to the wider group. Do you agree things are changing?

Bowles: There is some evidence that things are changing at the top end, so the largest schemes – the sort of schemes that we would deal with on a day-to-day basis. But even there the evidence is mixed. We look at the markets from an investment perspective and you can look at clients that have DC and DB sections and you can look at what they have done in the DB section and the types of sophisticated investment solutions they have deemed appropriate to implement; and then you can look at their DC section where it’s clear that the same level of rigour has not been brought to bear on the solutions that have been implemented. Whether you agree with the outcome or not, the rigour just hasn‘t been there so I think the evidence is actually mixed at the top end. You drill down to the small schemes and I don’t think DB and DC are getting close to having an even allocation of time.

Chinnery: The challenge is that DC plans are growing rapidly particularly at the larger end where you’ve got trusts that have better governance structures. But when you get to the mid and lower end of the market I do think the pension crisis issues of DB tie down the trustees who have limited governance resources, and who have more and more stuff to worry about. DC requires a different mindset as it is all about helping members to achieve the best in income replacement.

So for DC I would argue that you need different people because you cannot go into DC meetings with a DB-worried head on.

Bowles: It’s interesting because DC committees have been set up and generally they have people who understand DC on them, but in a lot of cases they’re not trustee representatives and they are reporting back into a main trustee board that still has a significant knowledge gap on DC. So what you are finding is a lot of this stuff is going round in circles and a lot of decisions are actually taking quite a long time to be implemented if not re-reviewed because you are having to almost educate and inform at the same time as it’s going from the DC committee up to the main trustee board.

Mowbray: There is a straightforward issue of incentivisation here. I don’t want to focus too much on regulation but clearly on the DB side there are some pretty obvious incentives for corporate sponsors to take advice in order to take that problem seriously, because if they get it wrong there is a direct financial impact on their business.

So I do think there is definitely a greater role for someone or something – be that consumer groups or Steve Webb or the regulators – to force that issue. I am not suggesting a bunch of horrible prescriptive regulations but I think there is definitely a role to try to incentivise sponsors, advisers and providers to take the DC problem more seriously.

Hames: I think auto-enrolment for the first time has pushed DC onto the main board agenda. In the past it has been DB so naturally that was what the trustees have focused on because that’s what’s been flagged up at every quarterly corporate board meeting.

I wouldn’t entirely agree that you need different people working on DC – there is a lot of trustee knowledge within DB particularly in the investment area that could be transferred to DC, but it is probably best to separate those meetings rather than having a 10 point DB agenda and a two point DC agenda.

Flynn: What we have seen is a number of fairly large companies opting for the Master Trust solution where there are independent trustees and governance is really well established and we have actually seen some customers move out of Stakeholder into that Master Trust solution for their auto-enrolment journey. So, trust-based DC is re-emerging as well, not necessarily on the unbundled side but as an insured bundled vehicle.

Lyne: Things are changing. Anecdotally we are hearing it and people are conscious that they have got more people in the DC scheme and they understand they need to deliver a DC scheme that can facilitate retirement and flexible retirement, and actually making sure that they don’t have an HR issue – you can’t have people retiring on low incomes or being unable to retire due to low incomes. It is slow but people are starting to think about making sure their DC scheme is positioned to help their employees retire or at least have a reasonable replacement income on retirement.

Fiveash: I heard a statistic the other day that in excess of 50 per cent of employers will be going through Master Trusts for auto-enrolment, so a very high percentage. Employers do like the fact there are independent trustees on a lot of these boards overseeing the governance.

Our independent trustee board will review the investment strategy regularly and I think you will probably start seeing more changes happening over the next year to two years with these schemes.

Chair: I agree with everything that has been said, but let’s not forget that DC is not solely trust. We have a large contract-based base to work from and employers have to take an interest in what’s going on. I also think when we start getting significant money in Master Trusts that’s when employers will want to take back a bit more control.

Hames: You will also see the regulator taking a lot more interest in the terms of engagement of the independent trustee and how much teeth they really have. The terms of reference and how they are acted upon will become important issues.

Lyne: And how much knowledge they have. Independent trustees do a great job in DB and DC but some people have been asking how qualified are they to actually do the job that they are doing.

Mowbray: It’s not obvious to me that these different structures necessarily have a huge impact at the moment on investor outcomes. There is an impression that that is the case but it’s not obvious to me that there’s a huge difference between the different structures.

Defined Ambition
Chair: Steve Webb has widely comented on ‘defined ambition’ – how do you believe that will impact DC provision or do you think it’s just muddying the waters?

Fiveash: The issue for us is how all of these things piece together; so you have the Minister’s objective for low charges, you have ‘pot follows member’; you have defined ambition and you have capacity issues for providers in the next two to three years. So how and when do all these things come in and how and when do all providers cope? For example, how does a defined ambition scheme work with ‘pot follows member’ with guarantees on it? Does it mean that the pot then has to stay where it is? We would like to know how all this works together. I’m not saying these are all bad ideas I think confidence will increase in consumers if they can get some element of guarantee, that’s proven by research, but I do think there is an education piece around DC that needs to be achieved first, and we should wait until we’ve had a go at that and we see what happens with auto-enrolment before thinking up even more innovative ideas to an already complicated pension structure.

Flynn: We talked earlier about challenges in capacity just to get through auto-enrolment, so bringing in another layer of complexity means there is a risk of undermining the establishment of auto-enrolment.

Lyne: People talk about guarantees in DC being the route to all enlightenment. The reality is you’ve got to be very careful about guarantees from an investment standpoint – you’re giving up a lot of potential return, you’re giving up a lot of the benefit of duration in terms of how you invest and if people understood the cost of the guarantee or the cost of defined ambition would they understand it when it comes to the impact on their income in retirement, would they be comfortable with that?

Hames: The unfortunate thing about this kind of risk-sharing is it would have been a much better debate 10 years ago when we were seeing the rapid move from DB to DC where we went from black to white – it would have represented somewhere in the middle.

Pension projections
Chair: The next topic on our agenda is around pension projections. Personally I’m not entirely sure that the projections we have are fit for purpose. I don’t think people understand them and I don’t think people get what they are trying to achieve.

Flynn: I would agree with you. I think people at the outset, at that disclosure point of joining the scheme, get a projection that tells them something and a year later they get a benefit statement that gives them a projection that’s on a different basis. So how do we expect people to really understand what’s going on? There’s a lot we need to do as an industry to improve the way we help people understand what projections are about and I think we do still overstate.

Fiveash: In DC, the projections have got one purpose in my mind – making people aware that they’re not contributing enough. The main warning that should go on the bottom of most projections is that ‘this will bear no resemblance to what you actually get back’. But it’s quite a useful indicator of exactly how much you need to save to get anywhere near a meaningful replacement value. So we need to think about what projections are useful for.

Mowbray: I agree – I think they’re becoming increasingly discredited. Why, after a period of market volatility and crunching yields, would we now look back and change the projection rates? What’s fundamentally different now compared to a month, six months, or three years ago? We just seem to be looking back and closing the door after the horse has bolted, which will just further discredit them. Advisers spend a lot of time trying to explain why numbers in this projection are completely different to some other numbers that they might be explaining, so there are big issues. They are potentially misleading, and particularly misleading for people who are most exposed to risk, i.e. those near to or in retirement.

So there does need to be a fundamental rethink – there is ongoing consultation with the regulator which is well evolved but it will probably develop a more slowly than a lot of us would like.

Lyne: Getting this right is so fundamental to getting people engaged in terms of a) what they’re trying to do and b) what they need to do in terms of retirement planning. The number of positives that could come about by actually having a really good projection communication central to the whole engagement piece is huge.

Chinnery: Wouldn‘t it just need to be something around income replacement? I’m earning £25,000 now and I’m going to be targeted to get £7,000 in retirement and that should be the catalyst for the conversation.

Then you have to make assumptions. My point is that projections have to build on something – they have to say, given your age, what you’re saving, what your contribution level is etc; so there has to be data in there and that really you can get off the member record-keeper. So then you are able to be as specific as possible rather then generic.

Chair: There just needs to be a complete holistic approach to all of this. There needs to be some central database, if we’re ever going to achieve it, where you can collate all this stuff and you can give yourself your overall replacement income from all sources.

Mowbray: One problem we have is that the regulator has tried to standardise or prescribe these things, but, there is just too much variation in the products and the underlying investment options, people’s contribution profiles, and all kind of stuff – these variations don’t sit well in the very prescriptive regime which we have at the moment. There needs to be a more principled-based approach to this to get a better outcome.

Chinnery: I think we are going to get there on the technology side. I saw a software provider a few weeks ago that does collate stuff including bank accounts so, while we’re not quite there yet, we will be shortly.

Hames: You’re right, the problem is to get a really accurate picture takes a bit of work by the member to plug in the past benefits, but if they are willing to go that extra mile it can be great.

Chair: Also, why do I not get a benefit statement about my state pension?

Fiveash: That’s a good point – especially for the population currently under auto-enrolment, their biggest replacement income by far is going to be the state pension, so to produce a projection without it is just fundamentally wrong. We’re fully in support of the vision of the central register – it exists abroad and it works abroad and it has increased engagement. I may not open my pension statement but I would go to a central place and type in my NI number to see everything in the same place.

Lyne: It‘s remarkable that we don’t have that now because it’s so central to everything we have been talking about in terms of engagement, increased savings, decision-making.

Chair: Well, we all talk about good outcomes – surely the good outcome is that you understand everything that you’ve got?

Mowbray: It’s not just about the projections – it’s about ultimately building investment solutions that deliver satisfactory outcomes as well, but these two things absolutely have to happen hand-in-hand.

Bowles: We talked also about changing assumptions and somewhere, somebody has to make some decisions about the assumptions that these things will be based on, and that determines a lot about how they look as well. So I don’t disagree with a portal, I don’t disagree with what everybody has said, but the reality is that a projection is an assumption and somebody has to determine what they are.

Mowbray: The problem is that the rules by which those assumptions have been made have been very prescriptive in the past. No one has taken responsibility for them. People actually need to start taking some responsibility – they need to be putting their name against those assumptions.

Chair: And putting their name against something that is meaningful to Joe Public. Let’s talk about some investment solutions now. So new decumulation investment solutions are being introduced, specifically for drawdown. Are these different to what we have at the moment?

Bowles: Some of the ideas are definitely different, yes. Accumulation solutions are primarily about growth as a primary objective and risk control as a secondary objective and as you move into that latter phase, the stable growth phase, then you are flipping those things around. Therefore, some of the tools might be the same, but how you package those together, and what you’re trying to achieve I think is fundamentally different. In the accumulation phase it is about growth, while in the stable growth phase, growth is important but trying to limit that maximum drawdown and trying to control volatility is much more important. So the blend that you’re going to put together and the controls that you’re going to put on are different. We’ve already discussed some of the tools, such as guarantees, but there are other options. There are options that are using in reality slightly more complicated investment tools, so using some of the synthetic approaches to try and manage that volatility and maximum drawdown.

So there are new solutions that are fundamentally different to the growth solutions we’ve already got. Are there compromises with some of those solutions? Yes, for sure. Some of these solutions are probably more complicated – they’re using tools that we haven’t really seen in DC in huge quantities before and a debate will need to be had about how palatable they are for the audience. But what they do, and what’s driving this, is this aim of trying to generate more defined outcomes. Trying to actually narrow down that range of outcomes and using investment tools that are readily available to do that is key.

Lyne: I think the lens that the trustees and governance boards are looking through is becoming more focused. We’ve done lots at the growth stage; now we are realising that people are retiring so we need to look at that and actually if you look at the choices and options that people have at retirement, they are becoming much wider and much more flexible. So I think it is only right that we look at the solutions that we put in play.

Flynn: It comes back to the engagement piece – we have real challenges actually getting people to understand annuities at the moment!

Lyne: The way we think about it is you can either have a flat annuity or an inflation-protected annuity – the implications of that decision in terms of your income in retirement are quite stark. The investment options you choose to match that annuity cost reduce the conversion risk on it, so it is an important decision.

Flynn: But I do believe income drawdown is an advice point and you have to be very careful if we are thinking we can do this on a mass market basis – the potential risk of people ending up in the wrong place is significant.

Chinnery: From where we are now most people will still be buying an annuity. Do people really understand annuities? Of course they don’t – they were created by actuaries.

When it comes to the income replacement piece, people will need to start making some decisions about when they retire; they may be retiring later; they may choose to part-retire; it’s going to get really messy. There is no cliff-edge of retirement any more and that’s a big challenge because how do you migrate people from accumulation to consolidation, and then flip that to an income provision?

Unless the law changes about the £20,000 requirement from income, most people are going to go into annuities, therefore the benchmark has to be the annuity level of whatever it is and the challenge for any provider of alternative choice is how can you achieve a better long-term income stream? At the moment it’s easy to say ‘annuities are a rip off, because what do you get? Not very much’, but because people haven‘t saved enough they look at the choice between £100 or £120 a week and guess which one they go for? Even though that could cost them later on.

Hames: That’s why I find the idea of income drawdown as a mass market solution worrying. If you look back over the last 10 years, people who went into drawdown in order to outperform the annuity market will almost certainly have been sorely disappointed. Even targeting a 4 and 5 per cent net yield after mortality drag and charges has proved quite a task – I bet they’re thinking that the original annuity wasn’t quite so poor after all.

The future
Chair: To wrap up, can we focus on the perception of financial services generally? Is the perceived negative perception of pensions one of the biggest challenges we’re facing? Do we need to do anything about it or is auto-enrolment going to change things?

Flynn: We definitely have to do something about it because although auto-enrolment forces people into pensions, and inertia will kick in and they won’t opt out, you are going to get people opting out at the wrong point, making incorrect decisions. So one of my key objectives is to make sure that we make the auto-enrolment journey into something that is very positive and we’re speaking to people at the right times and helping them to make those decisions. Removing this whole mistrust of the financial services is not going to happen overnight but I think we can start to work on it.

Lyne: I was in a meeting recently and someone asked ‘Do you think market volatility is going to put people off investing for DC?’ and my view is that it’s not market volatility that’s going to put people off saving for their retirement, but the perception of the City, the perception of financial services.

There’s nothing here we’re going to change overnight but comments made on the launch of auto-enrolment about rip-off pension charges are not that helpful. It’s something that as an industry we can address and there needs to be a collective understanding that this ‘noise’ is damaging, and for a number of reasons but more importantly it’s damaging because it will give people an excuse not to save. 
All I can see in the future is more change and increasing legislation with more pressure from the politicians and I think that will have an impact. It is a big challenge, but I haven’t got an answer for that today though!

Hames: Saying that, I think it is diminishing as an issue because of auto-enrolment – not because I think the public love financial services any more. The banks are not popular, but everyone has a bank account because they feel they have to have one as part of their day-to-day living; they dislike most professions – Estate Agents, Solicitors and while they will never love us, they will grudgingly accept us. Also I think auto-enrolment with an employer underwriting a lot of the costs will take some of that way.

Chinnery: If it’s not Libor fixing, it’s the gas price fixing – all these stories will just keep on going as it sells papers and I don’t think this is ever going to change. But Steve Webb has said that if we don’t sort it out, there are certain things that he’d be able to do and he’d be very popular for doing them, so we do need to do better and that will primarily be by delivering better retirement savings. If we create the right structures with best governance practices modelled I think we should persuade the government to be bold and go the whole hog and actually make things compulsory. I do think that the Australian model is the key.

Mowbray: It’s all about contribution levels, so whether you do that through compulsion or through better communication somebody will decide. It’s probably about having a relatively simple low cost benchmark product and I guess around that it’s about people and education around this – it’s all about long-term outcomes and trying to get people to understand and more effectively trade off more salary today against more salary or any salary in 20 years’ time.

Fiveash: I would agree with a lot of what has been said. We’re not going to change the press, but what we can do is get our own house in order. We don’t help ourselves sometimes – for example, the issue around charges is bubbling on and on. Pension schemes in general are good value in this country, especially those being used for AE. I have been quite impressed with the DWP’s risk management process in managing some of these issues to try and make auto-enrolment a success.

But I do think we can get our own house in order with some of the basics – everybody should know what schemes are charging them and they should know it in a simple way. I think it’s good that the industry bodies are getting together, but that can be a slow process. I think eventually a regulator will need to come in and say ‘let’s follow what the Code of Practice(s) says and try and make it work’ and move it forward quicker, because I do think that is a big issue and we need to remove this charges issue and move on, because that is one the biggest things damaging consumer confidence at the moment.

Bowles: Did Australians love the Super when it came in? No, probably not. Did they have a great love of pensions at that point? No, probably not, but actually if you speak to them now, 10 years on, they have a level of respect for it and the fact that they have managed to accumulate some pension pot through it is great.

So today in the UK is it our biggest challenge? No it’s not. It’s something that needs to be looked at but it’s not something we need to be overly concerned with because I think we’re heading on the right road with things like auto-enrolment. I honestly believe that auto-enrolment and compulsion are the solutions to this. The only other option is to go down the pure financial literacy route and get people to a level where they don’t look at the papers
and panic.

Chair: Gentlemen, thank you very much – yet another interesting debate.

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