Experts say technical details on the Government’s retirement guidance website are “misleading” and could give consumers the wrong impression of the cost and tax implications of the pension freedoms.
The Pension Wise website, which went live yesterday, focuses on six steps users should take in turning their pension pot into retirement income.
Under a section on flexi-access drawdown, the website says: “You can leave your pot to someone when you die but they would have to pay inheritance tax on it.”
Towers Watson senior consultant David Robbins says: “As a general rule of thumb pension assets outside of the estate are not subject to inheritance tax. I do not think it is right to tell people they will have to pay IHT on pension pots.
“Aside from that, most people’s estates are not big enough to be subject to inheritance tax and it is not due on what you leave to your spouse.”
AJ Bell technical resources consultant Lisa Webster agrees the statement is “misleading”. She says the site might be referring to money taken out of a pension and held in a bank account, which would be subject to inheritance tax, but says that is not clear.
She says: “The IHT details are in the wrong place. It should be under the section on taking the whole pot as cash.”
Webster adds that the site claims there will be a charge “every time you withdraw money” from flexi-access drawdown but that you only “may” be subject to a charge every time a small amount of cash is taken.
She says: “But it is much more likely to be the other way around. Some providers won’t charge for ad-hoc drawdown payments, but will for UFPLS.”
The site has also been criticised for a lack of prominent signposts to regulated financial advice.
Financial advice is referenced at the end of the shopping around section, and points users to a page on the Money Advice Service website on choosing an adviser. At the bottom of this page are links to adviser directories.
MAS’s at-retirement adviser directory has opened for registration but is not yet live.
Penguin Wealth certified financial planner Craig Palfrey says: “There is minimal reference to advice – it is right at the bottom of a page and there is no link to a directory. The signposting to advice needs to be much clearer, given the site is very basic and miles away from giving people meaningful guidance.”
Informed Choice managing director Martin Bamford adds: “Advice is not well signposted but I did not have any big expectations in that respect. Once the MAS directory is up and running I hope there will be a more prominent link to the directory.”
The website also fails to mention life expectancy, despite having a section on ‘planning how long the money needs to last’.
Palfrey says: “I am surprised there is nothing to prompt consumers to think about how long they will live given the amount of coverage there has been on the risks of people blowing their pots too early.”