Industry divided over Pension Wise expansion plans


Pension providers are divided over whether Government-backed Pension Wise should be extended to younger people and not just those at the point of retirement.

Last week Money Marketing revealed policymakers were considering expanding the eligibility criteria for the new guidance service just three months after its launch.

Yesterday, the Budget document confirmed Pension Wise will be open to people with defined contribution pensions aged 50 and above.

The Government is also embarking on a new “comprehensive nationwide marketing campaign”.

New research suggests take-up of the £35m-a-year service has been low since it launched in April.

Some providers warn policymakers should work with the industry to boost take-up rather than expanding the service to fill up spare capacity.

However, others support opening up appointments to savers years away from retirement in an effort to increase engagement.

Fidelity Worldwide Investment retirement director Alan Higham says: “If I was the Treasury I’d sit down with the ABI and say rather than having a PR war, how can we boost the number of people using the service?

“More positive promotion of the service would be a good idea.”

Aegon regulatory strategy director Steven Cameron says it would “not be a good outcome” if the industry-funded service was expanded beyond its original remit.

He says: “I’m concerned now Pension Wise is there, it’s easy to call for it to be expanded to to do other things. We need to be very careful not to just keep building on so it ends up doing far more than it was intended to do, paid for by the industry.”

Staff delivering the guidance will need to be retrained to take into account the different needs of younger people, Cameron warns.

“We have a large network of individuals delivering the guidance and they have all been specifically trained on the pros and cons of different retirement options at the point you want to access your pot. If we suddenly say younger people can go to Pension Wise, the guidance would have to be reconsidered – does it include suggesting increasing how much they pay in, for example?”

But Royal London head of corporate affairs Gareth Evans says he always expected the service “would be used more frequently and earlier”.

He says: “People need to be thinking about what they are doing well ahead of reaching 55. Retirement is not a single point, it’s more of a long-term plan and we’re keen to see people get more engaged with pensions guidance much sooner.”

Royal London backed the ABI in calling on the Government to scrap the requirement for people transferring out of schemes with guaranteed annuity rates to see an adviser. The firm suggested Pension Wise could help policyholders come to a decision about giving up guarantees.

A Hargreaves Lansdown survey of 300 investors found just 10 per cent of the first cohort following the introduction of the freedoms had used Pension Wise. A YouGov survey of 1,649 over-50s – commissioned by Old Mutual Wealth for a forthcoming report – found only 1 per cent of people aware of the pension reforms have spoken to Pension Wise as a result.

However, out of 1,152 people members of workplace schemes run by BlackRock, 61 per cent have accessed Pension Wise. The Treasury blocked a Money Marketing Freedom of Information request asking for official statistics collected on the service.

Standard Life head of pensions strategy Jamie Jenkins says if demand is low, it would be “sensible” to look at expansion.

He says: “If they feel there’s no enough demand, the first thing should be to make sure people are aware. A big push by the Government might lead to a significant increase in uptake.

“But if over time demand remains low, the Government needs to review why that is – are few people finding the service valuable or are they getting support from other routes? But if people aren’t using Pension Wise there’s no point in maintaining it at its initial size.”


Adviser view

Craig Palfrey, certified financial planner, Penguin Wealth

The idea of the new guidance provisions was to help direct people as to their choices at the point they retire. By extending the Pension Wise service to people several years before retirement it is clearly stepping into the area of planning and advice. People five years from retirement need to be planning, not making decisions about how to draw benefits. This will make the muddy, confusing waters between what is advice and what is guidance even murkier.