Yes, OK, “Acc” doesn’t really look quite enough like “Ant” for the joke to work as well as I’d like.Â But still, in the financial world, Acc and Dec – short for Accumulation and Decumulation – have become just as high-profile recently as the conjoined Geordie reality-TV-hosting twins.
You’ll have noticed a couple of things about Acc and Dec.Â First, there’s still an irritating uncertainty about how to spell the longhand version of Dec – is it “decumulation,” or is it “de-accumulation”?Â To me, it’s bleedin obvious that it should be the former:Â “acc” means “in”, while “de” means “out”.Â TalkingÂ aboutÂ “de-accumulation” is as silly and self-contradictory as talking about an “in-outcome” or saying that you’re going “up-downstairs.”Â
Sorry, whinge over: and more importantly, secondly, you’ll also notice that up till now the twin conceps of Acc and Dec are always used in the context of retirement planning: the idea is basically that up to the moment you retire you’re in the Accumulation phase, looking to build up a capital sum, and thereafter you’re in the Decumulation phase, looking to use that capital sum to provide your income.
Since I’ve woken up in an argumentative mood this morning, I’m tempted to challenge this model, especially as far as upmarket people with well-paid white collar jobs are concerned.Â Increasingly, the idea of a “retirement date” as a watershed marking a fundamental change from life before to life after is looking like a last-century idea.Â Instead, for more and more people, there’s a long blurry period from about age 50 to age 70 when they’re accumulating and decumulating at the same time, and in different proportions from year to year and even month to month.Â As our parents live longer and longer, for example, the age of inheritance is getting older and older:Â many of us, not just Prince Charles, willÂ be well past our Selected Retirement Dates before we find ourselves heads of our families.Â And vice versa, you can decumulate while you’re still accumulating: for some reason I don’t understand, even though I still think of myself absolutely as a long-term and full-time capital-accumulating wage-slave, as a part of a gruelling current programme of pension restructuring I was able, a couple of weeks ago, toÂ decumulate a tax-free lump sum of about fifteen grand from a smal personal pension I’d left behind me in my wake two or three decades ago.
But actually, that wasn’t the point I wanted to make, even though you could certainly be forgiven for thinking it was.Â The (non-argumentative) point I wanted to make is that when you come to think of it, the twin concepts of Acc and Dec are relevant ways of thinking about all sorts of other financial services markets, not just retirement savings.
Perhaps the most obvious example is the whole area of saving for children.Â Whether through CTFs or otherwise, many parents, sometimes along with grandparents and godparents, accumulate capital throughout their offspring’s younger years – and then, later, there’s the flipover into the decumulation phase, with costs including going to uni, buying a first car, getting onto the proverbial property ladder, the dreaded daughter’s wedding and, of course, the simple non-specific paying-over of the proceeds of your darling son or daughter’s CTF (probably about Â£30k if you’ve maxed the top-ups every year) to him or her on his or her 18th birthday, so that he or she can enjoy the huge pleasure of spending it on whatever will make you most cross and upset.
Of course there are plenty of other Acc/Dec pairings in the world of savings.Â I’m not sure if you still get Christmas Clubs, after a big and popular oneÂ fell rather spectacularly into a seasonal snowdrift a couple of years ago, but they obviously follow an annual Acc/Dec cycle.Â So does holiday saving.Â So does most saving, when you come to think about it.
What’s interesting, at least slightly, is that in the world of retirement savings thinking around Acc and Dec has led to a new generation of products that are designed to bridge across both phases – rather than cashing in your pension fund and using the proceeds to buy an annuity, you can now draw down capital from the fund either as well, or instead.Â I wonder if it’s possible to come up with other product ideas that bridge across the Acc and Dec phases in other parts of the savings market:Â for example, if you committed to saving enough, for long enough, towards a deposit on your first home, could the product you chose for the purpose also include some sort ofÂ discount or other benefit on the mortgage that you’ll need when you cross over from the Acc to the Dec phase?
I think there could be a big idea here:Â if pension products are now designed to evolve to meet people’s needs through both accumulation and decumulation, couldn’t other savings products usefully do the same?Â
As you’ve probably gathered, this line of thought isn’t completely clear in my mind yet.Â Apologies for that, but to be honest, I’m hoping to find a client who’ll pay me to give it some more thought – after all, as I say, I’m still in the accumulation phase….