The Government faces mounting pressure to review the funding regime for Pension Wise and tackle fraud as the freedom reforms begin to creak.
Last week the Treasury gave the first indication of how the state-backed guidance service is performing.
Pension Wise has provided 18,000 guidance appointments in the three months since its launch although the Government has not broken down the figures to show how many of these were face-to-face through Citizens Advice and how many were over the phone through The Pensions Advisory Service.
Officials also estimate in total 925,000 individuals have visited the Pension Wise website, although no information has been provided on actions taken as a result of any receiving guidance.
This week George Osborne told members of the Treasury committee that 90 per cent of those who had used Pension Wise had reported satisfaction with the service in an exit survey. However, the Treasury has so far been unable to provide any additional data to support the Chancellor’s claim.
Separately, national data collected by City of London police shows reported losses from pension fraud shot up 235 per cent in May to £4.7m from £1.4m in April.
There were 3,704 reports of pension liberation fraud in the two years to May 2015, with combined losses of around £25m. Average losses from scams are now at around £15,000.
The Department for Work and Pensions, one participant in a multi-agency taskforce tackling scams, warns the data “should not be taken out of context or wrongly described as a spike”.
It says: “Rises could be due to a number of factors, such as increased industry reporting or rising awareness.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “For most investors the pension freedoms are working well but the risks of pension fraud and the improbability of widespread take-up of Pension Wise were well known in advance.
“The pensions industry needs to agree with policymakers the minimum standards which all pension investors should receive when they access their pension savings.”
The Government has already extended Pension Wise to make it available to anyone aged 50 or over, a sign that take-up of the service has been lower than policymakers expected.
Informed Choice executive director Nick Bamford says the £35m service should be funded out of general taxation rather than through a levy on financial services firms. Advisers have been forced to pay £4.2m towards the running of Pension Wise in 2015/16.
Bamford says: “If these early numbers are indicative of the annual demand for Pension Wise appointments, then it means it costs about £650 per person to deliver. They could have got authorised, regulated advice for that. The problem is as soon as the Government realises take-up is low it makes it available to more people rather than reviewing the costs because there is an endless pot of money from levy payers. This should be funded from the general tax pot rather than through an industry levy.”
Number of people who have received guidance appointments either through TPAS or Citizens Advice
Rise in reported losses resulting from pension fraud in the month following the introduction of pension freedoms