Industry wary of low Pension Wise take-up rate

Lowe-Steve-700.jpgPension Wise has been accused of glossing over its low-take up rates while focusing on rave reviews from clients.

The evaluation of the Pension Wise service published by Department for Work and Pensions today says there is a 92 per cent satisfaction rating from customers.

Having used Pension Wise, 92 per cent also feel confident in their ability to avoid scams, versus 78% of those who have not used the service.

However, Stephen Lowe (pictured), group communications director at pension provider Just Group says the results are good but do not address an obvious issue with the overall number of people using the service: “This is another annual update showing that the vast majority of those using the guidance service find it of tangible benefit

“It’s a great set of results but we shouldn’t ignore the elephant in the room – take-up is too low and the reality is that increasing numbers are going it alone when accessing pension cash.

“FCA figures show take-up of guidance and professional advice was flat or falling among those accessing pension cash for the first time, with the exception of those buying guaranteed income for life solutions.”

Lowe cites a data bulletin from the FCA which shows between October 2016 and March 2018 around 69 per cent of clients going into drawdown used an adviser and around 10% were using guidance from Pension Wise.

For those making a full withdrawal the percentage receiving advice went from 38 per cent in the six months to March 2017, down to 32 per cent in the following six months and down again to 25 per cent in the six months to March this year.

The percentage receiving guidance from Pension Wise when making a full withdrawal went from 18 per cent, to 14 per cent and 15 per cent over the three six-month periods respectively.

Lowe says: “Legislation passed in the Financial Guidance and Claims Act will require people to receive independent and impartial guidance when accessing their pension benefits unless they explicitly opt-out of receiving it. The FCA has been charged with developing the rules for how the opt-out process will work in practice.

“The FCA needs to address the findings of its own Financial Lives research that showed widespread misunderstanding among those planning to access pensions, including the half it identified as ‘potentially vulnerable’. Ensuring the majority of people receive independent and impartial guidance or regulated financial advice should deliver positive progress.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Not surprising really, word of mouth gets around faster than Govt. advertising.

    SITUATION: Pru end reams of paperwork to Member age 60 with an old GAR (9.3%) WP pension, value £49,000, mentions 4 options and NOWHERE does it say that a) he HAS to consult with an ADVISER to do anything other than an annuity. b) no mention of a possible ENHANCED Annuity because of heart issues c) that the adviser will charge a fee d) the Adviser is unlikely to recommend withdrawal e) the Adviser is unlikely to accept him as an ‘insistent’ Client f) at a value of £49,000 it would not be financially viable for either party g) no mention of OMO and Spouses pension, Member called Pension Wise for advice and, of course, they do not actually give ‘advice’. I did give him pro bono ‘guidance’.

    • As you may recall, I have suggested on numerous occasions that pre-retirement packs should be fronted by a single, brightly coloured laminated page with an easy to understand bullet point list of the options the recipient should consider. Mention should also be made of the fact that most IFA’s don’t charge for an initial FactFinding consultation (I know of no colleagues who do, though there may be a few) and that any fees are subject to prior discussion and signed agreement. It seems so obvious and straightforward that one wonders why the FCA doesn’t just……

      That aside, I imagine your pro-bono guidance was that (unless he’s nearly at death’s door) he’d be mad to do anything other than apply his entire fund to secure an annuity based on the 9.3% GAR (assuming, as is common, an only slightly lower rate is available allowing for a widow’s pension).

      BTW, I may be showing my ignorance, but I’d not been aware that policyholders are obliged to take regulated advice if they want Income DrawDown instead of an annuity (however good the rate may be). In fact, I’d not been aware that policyholders are obliged to take regulated advice if they just want to cash out their fund in its entirety. I had a client who did exactly that without advice barely 18m ago. Have the rules changed in recent times?

  2. Good for you helping that member.

    Was it a Defined Benefit pension?Unlikely if it’s an old With Profit Endowment with a GAR, probably DC benefits so advice would not be mandatory.

    Pru docs are indeed very lengthy and the cover letter should mention PensionWise and the option to seek independent advice.
    Most also tell customers that they may get better rates if they have a health condition.
    Trouble is, there’s so much regulation around that customers get inundated with ‘essential info’ for providers to make sure they comply with the various rules & regulations that those really important stuff is obscured.

    PensionWise couldn’t cope if everyone who should seek guidance did contact them AAand I doubt that their staff truly understand the complexities. The pension comparison tool isn’t great either as it is not whole of market.

  3. DC Protected benefit pensions over £30,000 require Qualified financial advice.

    So far this year I have prevented at least 4 people making a ‘big’ mistake.

    The provider info is tumultuous and I agree a front page ‘bullet point’ or ‘decision tree’ approach would help.

  4. Yes, you are right. I’m not an adviser and did not recall that piece of legislation correctly.

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