Blog: Protection dictatorship is not the answer

About a year ago I was sat at a table listening as a financial adviser and a chap from NEST went toe-to-toe over the issue of compulsion when saving for retirement.

One of them (can’t remember which) believed individuals should be free to make up their own minds about when, or whether, to save. The other did not think it should be up to them, but mandatory.

There is a case for both sides. It is well-documented that a significant number of today’s retirees have inadequate savings. With life expectancy continuing to increase, the state will have to stump up more to support them.

But is compulsion a more satisfactory solution than education? Is compulsion even legal?

This issue was raised again this week, this time over the issue of protection.
Deepak Jobanputra, actuarial and product director at insurance provider PruProtect, caused a bit of a stir when he suggested a resolution to an estimated £1.3trn protection gap.

Writing for Professional Adviser’s sister title, Cover, Jobanputra commented: “Families, individuals and businesses strive to progress and grow but often fail to protect what’s most important to them. An element of compulsion could be a very effective catalyst in getting consumers to understand the benefits of protection.”

Jobanputra did not expand on what he meant by “an element”, but his remarks were not well received by the advisory community. “Compulsion is the action of a state or body that thinks it knows what is best for us”, wrote one IFAonline reader.

Another added: “If you remember, at one point we had compulsory annuitisation, which was accepted to be unethical”. Jobanputra branded the naysayers “defeatist”.

In truth, Jobanputra was not convincing. While protection should be the bedrock of any financial plan – and certainly figure higher on a priority list than a Sky Sports package – for many low earners it will simply be another expense they can ill afford.

The ultimate solution for those who can afford protection is education which, in order to reach a wide-enough audience, must come from the government.

Scott Sinclair is deputy editor of Professional Adviser and IFAonline.co.uk