Rebels and rules

"The rule that needs to be broken is the one that passes comment on how DC pension pots are used without considering other wealth."

I became Chairman of our School Council. I always remember meeting with the headmaster saying the boys wanted a school rule book. His response, I remember word for word, 50 years later:

“If I write a rule book it will immediately become a challenge to 2,500 boys to see what rules they can break and get away with. The rule book is simple – there are no rules until you break the rules and if you do break the rules you should have known what the rules were.”

Now was that anarchic or a description of a civilised society?

After completing my A-levels, I joined a major insurance company. The salary they offered along with the training to become an insurance professional seemed a far better offer than going to University.

I quickly discovered a new set of ‘rules’. Rules that were followed, no one knew why, but you followed them blindly. This manifested itself with a piece of work I was asked to do - a huge calculation sheet set out on graph paper. All the calculations were to be religiously followed. One problem, the resulting answers did not seem right to me. I raised my concerns with my seniors who went back to previous years’ calculation sheets – to check I was following the ‘rules’ correctly.

Who was I? My hair was too long, did I have overlong sideburns or a scraggy beard? Why did I leave the top button of my shirt undone and use my inappropriate office tie to keep my collar together? Who was I to be challenging the office rules that had been established over many years in more ways than one?

I had joined the company’s football team. In the clubhouse after the match, I was approached by an actuary in his late 20s who I had seen around the office. He was very friendly and took an interest in what I was doing. Then the rebel became a whistle blower. I told him of my concerns about the piece of work I was doing.

He told me to bring the files to him the following week. I showed him what I was doing, I think he immediately saw what was making me uncomfortable, but he encouraged me to explain myself with no judgement. He then took me to his boss.

There followed a nice overtime job of recalculating many past years’ calculation sheets. How many people in previous years followed rules that were the wrong rules?

I am now approaching retirement and like my fellow pupils at school I want to know what the rules of retirement are. I can then decide whether I am going to follow them or rebel against them. This decision will dictate my lifestyle for the next few years. My lifestyle will dictate my spending, my spending will dictate the pace at which I draw down my retirement savings.

Regularly, HMRC and the FCA publish data about the behaviours of those who are drawing on their pension pots. One commentator will say they are drawing down too fast. Another will say they could spend more. Why oh why won’t those pesky pensioners not follow the rules? But what are the rules?

The rule that needs to be broken is the one that passes comment on how DC pension pots are used without considering other wealth. Those who are considered not to be drawing down enough may have Defined Benefit pensions and are keeping their DC pensions in reserve for large spending items, that golden wedding anniversary, a replacement car and so forth. On the other hand, those who are drawing down too fast may have other assets that they can call upon when their pension pot depletes.

In effect, there are no rules.

Those assets may include shares accumulated through share save schemes, ISAs and various other insurance policies - how and when should they be used alongside pension savings?

Most common amongst all the assets will be housing wealth. How much of that can be used in retirement? How should it be used? What are the drivers that will determine whether the individual will move to a new house or not? When is that likely to occur?

Again, to reiterate, there are no rules.

Many of those who are currently reaching retirement will be of the same generation and background to myself. They did not take kindly to being told by their elders how to wear their hair, or how short their skirts could be. Will they take kindly today to being told how much they should or should not spend in retirement? I very much doubt it.

What they need is to be told how they can use what they have to fulfil their retirement dreams. Advisers are in the perfect place to help them, but they should be aware of one thing - once a rebel, always a rebel.