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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.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. “Independent & impartial”

    Ever heard of an IFA, love?

  2. Well what a surprise !!!

  3. Harry, I don’t think you would feel comfortable charging the level of fees required to make advice profitable when in many instances the pension pots held are often way below £30,000?

    • So if the same person requires an audit (even if he has made a loss) the accountant will only charge him £50.

      It is high time we were put in the same position as solicitors and accountants – after all the RDR was supposed to make us all professionals. The government doesn’t charge the Law Society or the ICAEW a levy in order to provide their potential clients with a free alternative.

  4. You just have to love this strap line these idiots, like to impress on us don’t you ?

    Not in the “spirit of the rules” ………. we play a game where we are not allowed to compete in, we play a game where we are not allowed to win, we play a game where we have to fund the team lined up to beat us, we play a game where the “the rules” ever change to ensure compliance to the above !

    I have never heard so much crap as this or that, a company “cannot” offer guidance to an existing customer but must instead refer them to a government run quango !!

    If the consumer does not, by now, know to shop around when looking at your retirement options then quite frankly I have little sympathy with them.

    Companies have a duty first and foremost to their shareholders and make a profit, not fund quangos, and the (by and large) morons employed by them; and it doesn’t help if we continue to hear ignorant comments by so called consumer panel spokes people !! I do wonder if these people think the world is still flat !!

    I do think what is abundantly apparent, is people like, the one pictured, do not have the first idea of running a company and how to make it profitable, when all you do is ask for your budget to be raised if you don’t have enough, I am fed up with people who are constantly holding their hands out for more money, who know the the cost of everything and the value of nothing !!

  5. I have no doubt that, since RDR, the ‘loophole’ (for want of a better word) of non advice allowing commission to be paid has led to consumer detriment – for example, UCIS, miss sold annuities by tied agents and excessive commission levels being taken when advice could have been cheaper (whilst offering regulatory protection) ….

    There are so many ‘elephants in the room’ when it comes to financial services regulation you only have to wonder what lobbying takes place to ensure these loopholes remain!

  6. Perhaps the process should include obtaining a form from Pensionwise to confirm they have provided guidance.

    Anything to string things out.

    Then blame the providers for the delay.

  7. What a surprise.. provider encouraging clients to use their own impartial advice service … no doubt numerous clients who have benefited from their advice service will now be in a drawdown contract invested in the providers funds !!!!

  8. Yes, providers are required to signpost the free guidance service. Although not obliged to do so as an IFA, I might like to reinforce that signposting by reminding clients that they have the option of this free service that might avoid accruing our advice costs. Before I make such a statement, I have sought from Pensionwise examples of the guidance outputs retirees who use the service can expect to receive. They can’t tell me; they want me to ask the Treasury. I tried to do the right thing, to contribute to the effort, but it seems they’re not on board with that.

    • I spent an afternoon at TPAs and I have to say I was impressed by the way they dealt with callers. Informative and educational but most importantly not “advice” only guidance. And like you say difficult to judge the outcome. I suspect some may have gone on to do what they wanted to do (withdraw their pension pot) and others may have gone on to seek professional advice.

  9. I would imagine customers with large funds normally have an adviser already. Also for someone with a small fund that going to an IFA and paying a fee may not be financially suitable anyway.

    Furthermore, everyone has access to Pensionwise, and if providers start playing silly tricks, then FOS will be on the case.

  10. How disappointing to read yet another inaccurate article about Pension Wise.

    The Financial Services Consumer Panel, which really should know better and do proper research, 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 (if)consumers keep their money invested.”

    As a Pension Wise Guidance Specialist, who deals with the public daily, I can confirm that the “broader remit” the Financial Services Consumer Panel want to see already exits. The tax implications and the impact on means-tested benefits feature in guidance sessions and the impact of charges is also covered. This was part of the training guidance specialists received and all three issues are incorporated into a checklist used by guiders during appointments.

    Perhaps I’m old fashioned but checking facts before ‘going to press’ used to be how journalists worked. Would it have been too difficult to find out what is covered in a guidance session before quoting the clearly misinformed FSCP.

  11. @Sue: see my post at 3:21 on 2 Sept above. “Would it have been too difficult to find out what is covered in a guidance session before quoting the clearly misinformed FSCP?” Not difficult. Just impossible. In my experience.

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