I enjoy reading ‘on this day in history’ type stories on Twitter. Today two caught my attention.
It was on this day in 1850 that Robert McClure left England on an expedition that led to him becoming the first to confirm and transit the Northwest Passage. This is the sea route between the Atlantic and Pacific oceans through the Arctic Ocean, along the northern coast of North America. It was seen at the time as the opening of a major new shipping lane. However, it remains unviable for several reasons:
- There have always been contested sovereignty claims over much of the route – several countries believe they have regulatory control
- The ice thickness has until recently required an icebreaker as mandatory – it’s an incredibly difficult challenge made more difficult by climate change
- There are three principal routes, each with a range of sub-routes, each with their own dangers and obstacles which are not always apparent, even using modern technology.
There are several parallels here with pensions freedom and flexibility. Last week the Financial Conduct Authority mandated that ‘investment pathways’ will be offered to those who enter pensions drawdown unadvised from 1 February. Now this is progress. However, the issues facing those preparing for retirement have some similarities with those facing anyone wanting to navigate the Northwest passage (bear with me!):
- It is not always apparent where regulatory control or fiduciary responsibility sits – adviser, regulator, trustees, employer, individual, provider
- The available options are incredibly difficult to navigate, even if you know (or think you know) your preferred route
- For each of the principal options involved in exercising pensions freedoms, each has a range of sub-routes, each with their own dangers and obstacles which are not always apparent, even using modern technology
So, investment pathways are a start. But much like the Northwest passage, the real challenge is in surveying the big picture at a very early stage. Then, understanding the various routes available, the opportunities and dangers of each with a regulatory regime to protect all stakeholders. Pathways at retirement are only a small part of this and come at a very late stage in the decision-making process.
The key is engaging earlier, in a more effective way. This is what we do and our business has many success stories where we have helped employers and their employees to make more informed financial decisions at an earlier stage in their careers.
No doubt many will see my analogy as tenuous, but I don’t mind being in the minority. The other ‘on this day in history’ story which caught my attention today was Nixon’s presidential inauguration in 1973. This followed an election when he won 49 out of the 50 US states with over 60% of the popular vote. He resigned in disgrace a year afterwards.