MPs, consumer groups and advisers have raised questions about the future of the Money Advice Service after it was overlooked by the Treasury to deliver pensions guidance next year.
Last week, the Treasury said Citizens Advice will provide face-to-face sessions while The Pensions Advisory Service will run the telephone service.
The Treasury is building the online guidance, with the MAS reduced to providing expertise behind the scenes.
MAS was expected to play a key role in delivering guidance sessions and had been working on how to build a website and possibly deliver face-to-face sessions.
Instead the organisation has been dealt a hammer blow by its much-reduced role, which was only communicated to the MAS last week.
The Treasury says there was a procurement process and it chose Citizens Advice for its bureaux network and existing capability.
It says the MAS still has a valuable role to play behind the scenes, with staff seconded to the Treasury. But serious questions are now being asked about whether the quango, whose raison d’etre is to offer money guidance, should be scrapped altogether.
After a scathing Treasury select sub-committee investigation into the service last year, the MAS is under a Treasury-commissioned independent review.
Experts say the investigation, led by former Consumer Focus chair Christine Farnish and expected to publish later this year, may have been a factor in the Treasury decision.
In addition, Treasury select committee chair Andrew Tyrie wrote to Chancellor George Osborne in July expressing “serious concerns” about the role of MAS in guidance.
Tyrie says MAS being dropped is “a big step in the right direction”, although the TSC still wants the Farnish review to consider whether to abolish MAS as a statutory body.
Moneysavingexpert.com founder Martin Lewis says: “This is a shaky moment for the MAS.
“It is an interesting move [by the Treasury] and it has to be coupled with the Farnish report. The report is likely to follow similar lines to what the TSC has said, and people like me have said, which is that the MAS is not a good use of this type of funding.”
Labour MP George Mudie, who led the Treasury sub-committee investigation into the MAS, says he is “delighted” the organisation has not been handed responsibility for delivering pensions guidance and believes it is a sign the Farnish review could scrap the quango.
He says: “It is good news that someone has had the courage to give the pensions guidance service to a good established charity.
“I was downhearted at the Treasury review because it had every indication it was going to give MAS the green light to continue along present lines. This is such a brave step for a Government department to take.
“I keep my fingers crossed that they deal with other problems to do with MAS just as objectively.”
Fairer Finance managing director James Daley says: “It is back to square one for MAS. It has been struggling to justify its existence since it was formed but the pensions guidance regime gave an obvious shape to its purpose. It was the obvious organisation to build and operate the guidance. The industry is going to start asking ‘what are we getting here and what results is it delivering?’”
TSC member and Conservative MP Mark Garnier says: “Is this a final nail in its coffin or just a blow? The MAS was around long before guidance so it would have been an add-on to what they were doing.
“But if you think it’s the sort of thing Citizens Advice could do then why isn’t the MAS doing it as well? There are questions about why the Treasury hasn’t awarded it to MAS as it was an obvious choice.”
Fellow TSC member and Labour MP Andy Love says: “The MAS has put a brave face on but clearly this is a snub.
“It shows some disarray between the Treasury and the bodies involved and I worry with these type of late changes how smoothly this process will go. MAS needs to think carefully about how it fits in now.”
Future of MAS
It says its website will help people to put their retirement savings in a “wider context”, such as using private pensions, other investments and long-term care needs.
Second, it is launching an annuity comparison table next month providing real-time provider information. It expects the guidance guarantee to point to this tool.
Thirdly, the MAS is continuing to develop its directory of regulated advisers for next April, which will help signpost people to advice after they have received guidance.
But others believe the MAS should now shift its focus away from money advice and focus on areas where help is needed.
Lewis says: “I am not a fan of a lot of what the MAS does and has done. I’ve called it crap in the past.
“The service has improved but I still believe the brand building of its website is not a good use of public money. It should be focusing on gap provisions – people where there is no provision for them – instead of trying to build a mainstream brand to compete with everything else out there. That has always been my perspective.
“The MAS in itself isn’t bad but a lot of what it does is a waste of money.”
Speaking in a personal capacity, Association of British Insurers director-general Otto Thoresen, who chaired the 2008 review that created MAS, says handing guidance to Citizens Advice and TPAS fits with MAS’ original vision. He says: “If you asked me three years ago there was a level of frustration about how the industry can influence its spending. I think that’s changed.
“We are moving away from a model that didn’t work on a partnership basis to one that is working on a partnership basis. The idea now is not to reinvent what can already be done well by other organisations. That’s positive.”
The MAS has a budget of £81.1m for 2014-15, with £13.1m spent on marketing, which is directed from the overall FCA budget.
Citizens Advice chief executive Gillian Guy has previously hit out at the “colossal” MAS marketing spend and MPs have branded the marketing strategy “misguided”.
The charity will receive money from providers and advisers under the guidance levy, with details to be revealed shortly. But there are concerns over whether Citizens Advice has the expertise to deliver such a vast service within six months.
The organisation points out it had 150,000 people come to its bureaux with pensions problems last year. It has 340 bureaux across Britain, staffed with 28,000 employees and volunteers.
It is also launching a training programme so its “advisers” are ready to offer guidance by next April and could start a recruitment drive.
The guidance will be rolled out in several soft launches and Citizens Advice will work on a signposting system to direct people to regulated advisers, but the details of how this will work in practice are unclear at this stage.
Citizens Advice will also act as a triage that can direct individuals to TPAS, face-to-face guidance at its bureaux or online.
A separate brand will also be developed to front the guidance sessions, launching yet another financial “advice” brand into the market alongside TPAS, MAS and Citizens Advice.
In a series of amendments to the Pension Schemes Bill, published this week, the Government proposed a statutory definition of what pensions guidance means.
It also unveiled a new criminal offence with a prison sentence of up to one year for falsely providing Treasury guidance, alongside new rules which mean the FCA could intervene if Citizens Advice or TPAS prove not to be up to scratch.
Despite the extra clarity there are still a number of outstanding issues, such as concern about take-up and the size of the provider or adviser levy.
Jacksons Wealth Management managing director Pete Matthew says: “The guidance regime is really half-baked. We are still waiting to see what it is going to look like. The Treasury has had six months to get it right and it is still very much up in the air.”
Tim Page, Director, Page Russell
This raises a big question over the future of MAS. I would hope for the benefit of levy payers that the Treasury comes to a swift decision over whether this quango continues. I hope it doesn’t. The worst scenario is the MAS carries on spending everyone’s money but, because they are out of the guidance picture, they become even more irrelevant.
Robert Reid, Managing director, Syndaxi Chartered Financial Planners
We now need to ask whether the MAS should exist at all and where to put the money. It could go to Citizens Advice.
Why reinvent the wheel? I never agreed with the creation of the MAS in the first place. It was an ego-trip for Gordon Brown and Otto Thoresen. We have wasted a lot of money here and the Government has a duty to deploy it more sensibly.
Should the Money Advice Service be scrapped?
Against – Jackie Spencer
The MAS continues to provide information and signposting for people making decisions about their retirement and pension options. The Government’s guidance service will focus primarily on helping people make decisions about their defined contribution pension schemes.
In addition to help with budgeting, our new retirement content has guidance for people across a wide range of issues as they approach retirement and later life, and can help them put their pension savings into a wider context, including private pensions, their state pension entitlement, and alternative sources of income – such as investments and the equity they have in their home. We can also help them think about long-term care needs – for example, what they may be entitled to from the state and the options available to them to supplement that provision.
We will be launching a new annuity comparison table that will provide real-time information, with a live comparison of indicative provider quotes, based on a limited range of financial, health and lifestyle questions.We are aiming to have the new comparison table ready to launch next month, which will enable the guidance guarantee to signpost to it, offering customers a free and impartial resource that will cover the entire market.
We are also developing a directory to help people find a regulated retirement adviser if they require more specialist help and a specific product recommendation. The Treasury is looking to us to deliver this by April as an important part of the overall guidance package. So our enhanced retirement information will augment the advice that will be available to customers who are making important decisions about how to manage their finances as they approach retirement and beyond.
Jackie Spencer is pensions and retirement expert at the Money Advice Service
For – Martin Bamford
The Money Advice Service should be scrapped today. No waiting for the outcome of the Treasury review, no second, third or fourth chance to get things right. Just lead this failed quango into a quiet corner of the barn and put it out of its misery.
That the Treasury has no confidence in the MAS to play a role in delivering pension guidance sessions from next year is about as damning a judgement of the organisation as could be. If the MAS was a jilted boyfriend, the Treasury would be the girlfriend saying: “It’s not you, it’s me.”
Perhaps if it had spent less on vanity advertising and more on guidance delivery, it could have succeeded. Perhaps the MAS could have survived if it had been created based on honest and open industry consultation, rather than morphing like an out-of-control and power hungry corporate beast from a small department at the regulator. Maybe if its chief executive had a little more political sense and had managed not to alienate the IFA profession with ill-informed opinions about ethics, and then a poorly delivered attempt at an apology, the MAS could have garnered support from a group of true consumer champions.
But it did none of these things. Instead it became proficient at spending other people’s money and alienating a key supporter. It became a giant with a shamefully large budget, instead of choosing to focus on helping those who most needed financial guidance. Even now, on hearing it has no real role to play in the delivery of the guidance guarantee, it appears to be in complete denial. Caroline Rookes needs to do the decent thing, accept the inevitable demise of the MAS and announce her resignation. I’ve got a bottle of champagne on ice for when that happy moment arrives.
Martin Bamford is managing director at Informed Choice