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Magazine Issues » November 2019

Opinion: Let’s call out complexity

Fiona_RintoulNever let it be said that I am obsessed with saving for retirement. My so-called “plan” is a guddle of bits of flats, micro pension pots from various past employers and some vague ideas about doing more literary translation in my dotage. This is a miracle of actuarial wizardry compared to my husband’s plan, which is … well, your guess is as good as mine.

It is a mark, then, of how spooky the spectre of pension poverty has become that even I have started to take stock. I have looked some stuff up on the electric Internet and even spoken to an adviser on the telephone, though in the end I decided not to pay him a visit, having obtained the information I needed from “a friend”. I know, I know. But this was a very knowledgeable friend. And let’s face it, the average financial adviser is nearly as spooky as the spectre we consult him to avoid.

Obviously, I know that I am way behind the curve here. Governments and other official bodies want people to start investing for retirement and other long-term goals earlier, and there are signs that they are doing so. Robo.cash, a peer-to-portfolio (P2P) platform that started in Russia in 2013 and expanded into Europe in 2017, reports that 78% of P2P investors in Europe make their first investment before the age of 35.

This information was gleaned from a survey of 600 investors conducted by Robo.cash. The survey – which also found that shares were the most popular first investment (34.4%), followed by P2P lending – revealed great engagement by younger people, with over a quarter (28.1%) making their first investment in the 24-29 age bracket – with long-term goals in mind.

This is clearly a self-selecting sample. And there is a part of me that feels that these results are a little sad. Like the news that young people no longer drink or smoke but instead eat a plant-based diet and nurture a range of anxieties unknown to man or beast when I was a gal. But, of course, it’s a good thing really. That’s why the German government is offering €200 to anyone under 25 who starts saving in one of the Riester retirement fund plans on offer in Germany.

The German government is also addressing the issue of getting the less well off to save for retirement, offering supplementary payments into Riester funds for people on low incomes who invest in these products. If the stars align, these supplements can cover almost the entire payment for people on very low incomes, according to the German fund association, the BVI.

This seems to be a well-meaning scheme, but the details are a tiny bit complicated, which highlights the main problems that afflicts retirement savings: complexity.

Until I received a steer from my knowledgeable friend, I was floundering in a sea of contradictory information and misinformation when trying to marshal my pension potlets into some order. He pointed me in the direction of NEST, the UK’s workplace pension scheme, which has one charge and a small selection of funds and now embraces the self-employed.

The relief. I can’t tell you.

Perhaps complexity should always ring alarm bells. New research from MSCI on CEO pay plans shows why. Complicated executive pay plans often mask misalignment of CEO and investor interests. Not all complexity is there to hide something. But a lot of it is. Institutional investors increasingly balk at complicated executive pay. We should follow their lead and call out complexity wherever we find it.

Fiona Rintoul is editor-at-large at Funds Europe

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