Life is not fair according to numbers promoted by the ONS that show the net contribution to the public finances of different age groups over their lifetimes. On average each of today’s over 50 year olds are on track to receive over £100k more than they will have given back. In contrast those under 25 will make a net contribution of over £100k over their lifetimes. Future generations, who haven’t even been born yet, will make even higher net contributions.
With that in mind, it’s easy to see why pension tax relief for older workers, with higher incomes might be in the firing line.
And that brings me to this week’s Platforum data point:
79% of net flows onto adviser platforms went into pension tax wrappers in Q2.
Source: Platforum UK Adviser Guide, Issue 31, September 2017
Prior to George Osborne’s pension freedoms budget in 2014, net flows into pension wrappers were below 50% of the total. The effects of the changes were immediate and dramatic and have been boosted further by a huge wave of DB to DC transfers.
Hargreaves Lansdown is closing in on its millionth client, and refers to ‘continued wealth consolidation onto our platform’ as a significant driver of assets. This wealth consolidation includes a substantial amount of existing pension assets and there’s no doubt that the growth of online self-directed pensions has been a massive driver of the D2C market.
The overwhelming sentiment at the Platforum Retail Investment Conference last week was that business is strong at the moment across platforms, advisers, tech companies and asset managers. But the data shows that much of that is built on pensions and the pensions freedoms.
Budget changes that stem the flow of assets into pensions are going to bite the retail investment industry. There won’t be much sympathy from the ‘jilted generation’ priced out of the housing market or paying interest rates of over 6% on their student loans.