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Experts brand Pension Wise website ‘misleading’

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.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. It stunned me how banal and babyish it was. Long on juvenile terminology like “pots” and “pension money” and short on anything useful like life expectancies adn Martin Bamford says. it says that the amount you should take will depend on “your retirement age” and whilst that is true, it gives no indication about a reasonable life span each retirement age might generate.

    They are, of course discovering the biggest problem of all with non-annuitised defined contriobution pensions – the one of self insuring the mortality risk. Given that the mortality risk is huge for a single life, an insurance alien coming to Earth would be flabbergasted to see each individual insuring their own risk. Without this compulsion, then with the benefit of hindsight, just about everyone is goign to get this wrong – and in many cases very wrong. Add on top the expensive gamble of self-funded care and the punter faces hugely expensive risks, too few assets to deal with them, and in time is going to become very angry and litigious.

    How exactly to you explain to someone that in order to optimise the utlity of their retirement funds, they should spread its use out over the period while they are fit and healthy, but to make sure its all used up before they need long term care?

  2. Well I think it is good. It is the Beta version, so can be tweaked, but I would encourage them not to tweak it too much or it will become a camel.
    I think many will read it and then phone or visit a guide as they will want more reassurance. The next stage then is what we need to see to comment.
    Positive so far in my opinion.

  3. There is a need for quality Adviser input from Advisers. Why should there be an expectation that clients will be lined up for the adviser community?. Quality advice should be demonstrably superior to DIY and Guidance. The advice industry needs to get its act together does MAS register fit the bill?

  4. If the new Pension Wise website reflects the final version, and the service expected from the face to face service from CABx and the phone service from the Pensions Advisory Service then their users are facing huge problems and risks.

    Most dangerously it ignores the impact of benefits, and much tax, within its examples and descriptions.

    Its main example is of a case where there is an absolute entitlement to Pension Credit, which is completely ignored when it sets down “Your total retirement income”.

    If people make use of the information on this service to decide how to use their options then many of them could make hugely unwise and costly decisions.

    I’ve put some more detailed analysis on my blog, together with some examples of the effects of the new pension freedoms on both older people and those of working age, as pension pots will be available from age 55.

    You can see the note at http://blog.cix.co.uk/gmorgan

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