Mid-life MOT a ‘nice idea’ but won’t work, advisers say

Hannah Godfrey writes

Advisers are sceptical the idea of a ‘mid-life MOT’, as proposed by Cridland and backed by the Personal Finance Society (PFS), would work in practice.

A number of advisers said they had doubts about the practicalities of the idea, not least because they were concerned about the take-up by the general public.

PFS chief executive Keith Richards (pictured) had first written to the Chancellor following the publication of the Cridland report to call for the implementation of the measure, which would work like a financial health check, encouraging people to take stock of their finances from age 50.

The facility could be incorporated as a trigger in the pensions dashboard and would allow people to consider their existing financial and lifestyle plans, as well as receive guidance on where to obtain help in the future.

Renewing his calls in response to the government’s plans to increase the state pension age to 68 by 2039, Richards said: “Yesterday’s announcement [of changes to the state pension age] was an inevitable step, but it needs to be backed by further action to mitigate the impact on thousands who will ultimately be affected in the future, including a campaign to educate consumers about the need to save for their life in retirement.

“The financial advice profession in particular would be poised to partner with the government on, if and when it chooses to proceed with [the mid-life MOT].”

Advisers not convinced

Advisers did not appear too enthused by the idea, however. Chase de Vere certified financial planner Patrick Connolly thought the initiative was “a good idea” but questioned the eventual take-up by the general public.

“We only need to look up the take-up of Pension Wise, and for that people are very close to retirement, where retirement planning should be at the forefront of their thoughts. Too many people in mid-life aren’t giving consideration to retirement planning and may well have other priorities,” he said.

“In theory it’s a great idea, in reality I would be quite skeptical in what the take-up of that would be.”

Yellowtail Financial Planning CEO Dennis Hall questioned the practicality behind the proposals, pointing out “allegedly there aren’t enough financial advisers to go around at the moment.”

Instead, Hall said, financial education should start in schools. Waiting until somebody is at the middle of their life to do something makes it incredibly difficult to catch up, he said.

“It’s a nice opportunity, but I can’t see that being particularly useful for people at that time in their life. Those that are keen will already be taking advice or doing something themselves, for the rest, what’s a half hour meeting going to do.”

‘Largely unaffected’

Both Hall and Connolly said their clients were largely unaffected by the proposed changes to the state pension age, which will affect anyone under the age of 47.

Hall said he had no clients within the age range affected, and Connolly said the few eligible clients he had were planning to retire early anyway.

Connolly said he fully expects more changes in the future. He said the current system was unsustainable.

“Either state pension age needs to increase, or state pension benefits are cut, or in some shape or form the state pension becomes means tested and isn’t universally available.

“None of them are going to be popular, but of the three, increasing the state pension age is likely to be the most popular option,” he said.

Hall was less happy with the changes, however. He said: “Nobody likes it really, you pay in all of those years and you expect to get something back.

“We’ve seen the ongoing issue with WASPI and how they feel they’ve been robbed of a few years, and you may get the next generation saying exactly the same thing.”

He added: “We’re expected to work longer, pay for our education and the baby boomer generation have just ripped all of the wealth out of the country.”