Consumer panel warns over providers’ pension guidance

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The Financial Services Consumer Panel is warning pension providers are shepherding customers to their own guidance services rather than Government-backed Pension Wise.

It says providers should “not pay an active role in delivering non-regulated guidance related to pensions”, the panel says.

The consumer watchdog also accuses some pension firms of not following the “spirit of the rules” requiring them to signpost to Pension Wise.

The panel says: “There are indications that consumers who contact their providers are encouraged to use the firm’s ‘in-house’ guidance providers, who are obviously not independent and impartial.”

It adds: “The conflicts of interest inherent in this approach cannot be overcome as the firm, from a commercial standpoint, will likely seek to maximise its profits from the customer without necessarily paying due regard to the latter’s needs and circumstances.

“It is crucial that consumers can access independent guidance to ensure they can make an informed choice that is in their best interest.”

The “hand off” from Pension Wise to other organisations – such as the Money Advice Service retirement adviser directory – also comes under criticism for being inconsistent.

The panel has called on the FCA to take “urgent action” to force non-advised sales to meet a “strict” code of conduct.

It says it is concerned the growth in savers buying annuities without advice is being “mirrored” for more complex products such as drawdown.

The warning comes as part of the panel’s response to the Work and Pensions committee’s inquiry into Pension Wise and the availability of advice following the introduction of the pension freedoms in April.

It raises concerns around the low numbers of consumers using the service and says Pension Wise must be independent if it is to be effective.

The new guidance service, which is funded by an industry levy, needs to have a stable source of funding “to attract the right staff”, the panel adds.

In addition, the consumer watchdog says the Government needs to be more transparent about how Pension Wise is performing.

The Treasury has repeatedly blocked Money Marketing Freedom of Information request on various aspects of Pension Wise.

Treasury figures show only 18,000 people used the service between April and July 2015.

The panel says Pension Wise sessions, which are delivered by The Pensions Advisory Service over the phone and Citizens Advice face-to-face, should have a broader remit.

It says: “Pension Wise providers should incorporate personalised guidance on the implications for tax liability and eligibility for means-tested benefits into their service.

“They should also highlight the significant impact that (hidden) costs and charges may have on returns consumers keep their money invested.”