Tangible’s chief executive (the dynamic, fragrant, polyglot, Karen Trickett) and I often find ourselves politely disagreeing about political matters and the recent Budget was no exception; provoking yet more discussion than heretofore. Calling my bluff, she asked me to gather my thoughts and put them in writing…
Disclaimer: What follows is my highly-opinionated, personal opinion and in no way reflects the views of Tangible, Signal or any part of the Cello organisation.
Mr Osborne is widely thought to have produced an excellent Budget ‘packed with fun for all the family’. But there are two specific areas of change, which, perhaps, shadow forth the future of family and personal finances and, more interestingly, indicate where we may be headed as a society when it comes to lifetime financial planning.
Firstly, and most easily dealt with, the increase in ISA allowances: It is no surprise that the Chancellor should have increased the amount of money that he will allow us to save ‘tax-efficiently’ in our Individual Savings Accounts. And it is equally unsurprising that he should have added a ‘fatter finger’ to the scales when it comes to supporting the national economy, by encouraging even greater investment in equities.
Those who are able to channel significant amounts from their annual salaries into their ISA will be ‘better off in real terms’ now and for the foreseeable future. And, of course, the thousands of extra pounds that will flood into the stock-market as a result cannot but help to stimulate growth in those market sectors favoured by fund managers and therefore buoyed by this assiduously tax-avoiding fraction of the UK population.
Naturally, this fillip to the ISA industry is another example of ‘fiscal prudence’ on the part of our urbane Chancellor. With no Government money available to provide – or even, it would seem, encourage – investment in UK manufacturing, technology, pharmaceutical or creative industries, why not get the Great British Public to do it for him?
It’s all common-sense isn’t it?
It remains to be seen what proportion of that Great British Public will ultimately be able to find a spare £15,000 or so from their annual budget to invest in this way (and of course to what extent the fund managers’ views of future successful industries and companies are congruent with what might actually boost exports and increase trade is all down to the markets in which Mr Osborne trusts) but putting all that to one side it is hard to see that this aspect of the Budget is anything other than common sense. It also plays strongly towards the classic Tory values of hard work and the virtuous discipline of saving (values that Gordon Brown before him would hardly have been likely to challenge).
So there are no surprises when it comes to ISAs and only some very straightforward responses likely to be provoked in the marketing world where I ply my trade.
We will all need to chase the wealthier investors harder and compete more effectively to acquire those who churn, those without a plan, the self-investors, the hobbyists, the plain wealthy and the sadly or confidently un-advised.
Equally we will all need to help those poor old IFAs clarify the benefits of advised investment and provide them with the tools, content and support they need to acquire all of those ‘in market’ during any tax year.
More interestingly, the latest Budget also offers something of a ‘Client-Relationship-Manager’s Charter’. Given the extremely large (by historical comparison) amounts of money that punters will be able to squirrel away in this tax-efficient (never tax-free) vehicle, the asset management companies will have an even greater duty of care to ensure that their investors are ‘saving monthly’, ‘topping-up regularly’ and generally ‘maxing out’ their tax-advantageous savings. Lots of opportunities there for marketing organisations to demonstrate the benefits of regular CRM and eCRM programmes – all without a requirement for providers to tinker with annual fees, charges or any other aspects of Total Expense Ratio.
A level playing field
And, of course, the increasingly level playing field facilitated by the many platforms means that just as with personal banking, mobile phones, utilities and mortgages the process of switching between providers will have to be simple, straightforward and customer-friendly. Which, in its turn, will mean a welter of welcome and (ghastly phrase) ‘on-boarding’ activity to warm the cockles of the agency financial director’s heart.
So far so predictable.
The shocker came with pensions.
Now I’m a copywriter by trade and so have naturally neglected to look at the proposed legislation in any detail at all, preferring as with most things, to allow the natural, osmotic, transference of information into what I loosely describe as my consciousness but (as no doubt the planners and account handlers of Tangible will confirm when citing chapter and verse) it looks like we’re all going to be able to get our hands on our pension pots and do with them as we please.
And this is fascinating.
I realise that only 25% of the amount saved into a pension will be ‘get-at-able’ in a tax-advantageous way but the fact that we are no longer going to be obliged to turn our pensions into measly annuities is tremendously exciting news and raises a number of very important issues that, I think, point the way to what this Government (and many others) see as the future of personal finance.
It’s only recently that companies like Just Retirement, Partnership and MGM Advantage (curiously, all clients we have worked with) have begun to bang the gong for the Open Market Option. Until they entered the sector, most people assumed that they were obliged to accept the paltry annuity offered by their pension provider. And exotic beasts like Enhanced and Impaired Annuities were the stuff of mythology until only very recently.
In fact, I would argue that many people are still completely unaware that at the point when they stop paying into their pension and start wanting to take money out, they will have any choice at all about how they do so.
With the Chancellor’s 2014 Spring Budget that may well change: Instead of looking at our pensions as fixed, determined and inviolable, we must begin to look at them more intelligently as only part of the provision that we make for living without hardship in later life. In fact, if you look at this momentous proposal in tandem with the more modest intention to increase ISA allowances significantly, you may see the glimmering of a very different kind of financial future, one which offers fascinating opportunities for clients and agencies alike.
Are we heading the Nordic way?
In the Nordic nations (so often held up to us as an example to us all, despite their levels of suicide, alcohol-consumption and general miserablism) steps are already being taken to rationalise the taxation and savings worlds to ensure that sufficient provision is made for later life. Is this the way that we are heading in the UK?
Will we be rewarded for saving at an early age with cheaper student loans?
Will the tax payable on income from our investments be less if we invest in the industries that the Government would like us to?
Will we be able to move money from savings to pensions for greater tax advantages?
Will we be able to draw down money from tax-protected savings to help pay for those services like arts, education and health that governments are less and less inclined to provide?
Will our mortgage rates be dependent on how well we’re planning to provide for later life?
Will our taxation rise and fall in response to how environmentally friendly our households are?
Will there effectively be two forms of currency; the tax-protected and the openly-taxed which we can use to engage with the state in different ways?
In fact, can we expect ‘lifetime accounts’ that help us to borrow and save in the most tax-advantageous, behaviourally sensitive way?
Will the indirect ‘moral’ taxation of alcohol and tobacco one day be supplemented by the unholy prospect of vast tax income (see Colorado) of state-issued recreational drugs?
One might have expected the Conservative Party to have shied away from the ‘big state’ implications of many of these, admittedly far-fetched, notions, but this is the Government that brought you Pension Auto Enrolment, the biggest state intervention in the personal savings market in living memory. And, of course, their enthusiasm for that notion was driven only by a desire to continue ‘balancing the books’ as an ageing population approaches a cost-of-living crisis if unprovided for in later life.
Leaving aside the bigger implications of two bits of proposed legislation on our children and their children, why do I think that a bigger ISA allowance and greater freedom to use one’s pension-pot as one sees fit represent the dawning of a new era of opportunity for the marketing services industry?
Balancing the books
Quite simply because the digital ‘revolution’ and the march of ‘relevant content’ have seen the marketing industry come ever closer to its earlier days (I’m thinking about the 19th Century in particular) when it was all about informing the consumer of the choices that the market offered them.
If, as I think this year’s Budget shows, we are entering a period where the primary objective of the many European and Global Centrist parties will be to balance the books of each nation, without manifest cruelty, whilst shrinking the influence of the state, it is the marketing services industry that will be at the vanguard of information provision.
It will be our job to explain the options open to consumers. It will be our job to support the IFA’s dramatically increased role in people’s lives. It will be our job to set out the benefits of one course of action over another. And it will be our job to entice, cajole, terrify and generally encourage the consumer into behaving in such a way that the governments of the world ensure that their populations are healthy, educated, hard-working, and as fiscally prudent as those governments aspire to be themselves.
George Orwell categorised advertising as ‘the rattling of a stick in a swill bucket’ and his vision in ‘1984’ of a monist state is long outmoded (isn’t it?).
Aldous Huxley’s ‘Brave New World’, however, doesn’t seem all that dissimilar to the one that we inhabit now and it’s one where the adwoman and the adman have very important roles to play.
Jonathan Spooner is executive creative director of Tangible