Pension Wise could be at risk of unravelling as calls for the service to expand come in the same breath as consumer groups criticise its existing guidance sessions.
Just five months since its launch, the Government’s flagship protection for consumers following the pension freedoms is coming under pressure to radically expand in scope and scale.
However, there are concerns the website and guidance sessions are failing to equip users to make a decision on their retirement.
And advisers and providers fear they will have to pick up the tab for a service that is yet to prove it is benefiting the organisations funding it.
So should the Government expand the remit of Pension Wise to give consumers a fuller picture of their personal finances?
Or does growing the service so soon after its launch risk undermining its core purpose of providing information on retirement options?
The Work and Pensions select committee launched an inquiry into the £35m-a-year service after fears arose following low take up rates.
Lord O’Neill, speaking for the Government in July, said around 925,000 had visited the website while phone and face-to-face appointments totaled just 18,000.
During the initial rollout of pension freedoms, there was capacity for up to 10,000 appointments a week.
Pension Wise has already been expanded once from its original remit.
In the summer Budget the Government confirmed it would extend eligibility to those aged 50 and above.
Initially only people within six months of their 55th birthday could book appointments.
Now organisations such as the Trade Union Congress, the Investment Assocation and Citizens Advice want Pension Wise expanded further.
However, worrying feedback from consumer group Which? reveals fundamental problems with the existing service.
In its response to the Department for Work and Pensions committee’s inquiry it says a snap mystery shopping exercise it ran on one face-to-face session, two phone appointments, and the website found serious flaws.
The Pensions Advisory Service runs telephone guidance while Citizens Advice provides appointments in person across the country.
Which? says consumers “are unlikely to be in a position to make a decision” after receiving the guidance.
It says: “Our research found the appointments were consistent in terms of the information provided and produced similar results, but were quite heavily scripted.
“While there were no inaccuracies in the information given, it was felt to be more of a generic information sharing exercise than a tailored guidance experience.”
The Pension Wise website, which is run by the Treasury, also comes in for criticism for lacking personalisation and the “disappointing” absence of simple tools such as tax or income drawdown calculators.
The Treasury says more than 90 per cent of people who completed an exit poll were either satisfied or very satisfied.
Organisations say a one-off session is an inadequate way to support people post-pension freedoms.
The Investment Association suggests the committee “considers how Pension Wise could be used to further support individuals through both the accumulation and income phases of pension saving as well as at the moment of retirement”.
While the TUC says Pension Wise is “being expected to do too much in facilitating the retirement income reforms” it says the guidance system “is further undermined by being a one-off service”.
Others say the service needs to go beyond information on pensions.
Citizens Advice research found 27 per cent of clients booked separate sessions to help with issues including tax credits and debt, and argues that flexibility would allow for “more appropriate” support.
Milking the same cow
But there is strong resistance to broadening the service.
Aegon regulatory strategy director Steven Cameron warns the Government should “not jump to any radical conclusions”.
He says: “It was always clear it would be a limited service that would not step into advice and personal recommendations – that’s the right way to frame it.
“There are two way to go – try to make it all of the solution, but that would be a big step to take. Going that far would have to turn it into a full advice service, which we would not support.
“The other way is to accept that Pension Wise will only ever be part of the solution and work at the ways it operates with other services, offered by providers, advisers and others.
Libertatem director general Garry Heath says any reforms must include explicit protection for advisers.
“We are already paying the bills for Pension Wise and what are we getting out of this as advisers? Most advisers don’t have much room for new clients anyway.
“And now we are picking up huge bills from the FSCS. You can’t keep going back to the same cow and milking it.”
Apfa director general Chris Hannant adds the prospect of expanding Pension Wise’s services risks further duplication of efforts among Government-backed financial services support bodies.
He says: “It’s fine for it to provide a service to people but let’s not recreate TPAS or the Money Advice Service.
“Do we really need two or three of these bodies? There are bodies already set up to do that, and I’m not a great fan of reinventing wheels.”
Providers under fire
Pension providers are also required to give tailored guidance – the so-called second line of defence – to customers at the point of retirement.
Aviva consumer platform director for retirement solutions Rodney Prezeau says anecdotal evidence from staff delivering the risk warnings found customers were disappointed with Pension Wise. He says they were returning to Aviva after using Pension Wise because they could get the same information from the provider and were frustrated by the lack of recommendations.
Providers themselves have also been criticised.
In its submission, the Financial Services Consumer Panel warns providers are “respecting the letter but not the spirit of the rules requiring them to signpost people to Pension Wise”.
It says providers should not “play an active role in delivering non-regulated guidance related to pensions”.
But Fidelity Worldwide Investment head of retirement Richard Parkin says the claims are unfair.
He says: “In conversations with any of our staff we will signpost to Pension Wise pretty clearly, it’s on virtually every page of our retirement information on the website.
“One issue is we are getting many customers who are not calling up for help and guidance, they are calling because they already know what they want to do. They saying not that Pension Wise is bad, but that they don’t need a full blown guidance conversation to talk about the options.”
£100k – £200k
The most common bracket of pension pot seen by Citizens Advice
Total TPAS phone customers between April and 31 August.
Number of total TPAS customers which were Pension Wise appointments
Estimated number of Pension Wise appointments booked with TPAS that weren’t fulfilled because savers were not available
Estimated calls to TPAS generated by a “halo effect” from the launch of Pension Wise and the broader reforms
45 per cent
The proportion of customers buying an annuity changing provider
55 per cent
The proportion of customers going into income drawdown changing provider
Total paid out in cash lump sums, with an average payment size of just under £15,000
Robert Reid, managing director, Syndaxi Chartered Financial Planners
If you want information that’s what you’re got from Pension Wise. There was always this lobby to have a public service for personal finance, but advisers shouldn’t have to pay for it. What benefit does it possibly give advisers?
The problem about giving people things for free is they rarely value it. We need to look about how it should be funded, if it’s to be extended to cover more areas it should be funded by public taxation.
Matthew Harris, director, Dalbeath Financial Planning
Expanding Pension Wise to include debt advice wouldn’t necessarily be a bad thing, we have come across a few clients with debt issues who have found it quite hard to get good support.
So if there was to be an advice service which brought together guidance on the pension options with debt issues that might be helpful.
But we need to make sure that IFAs don’t pay for debt advice, and if the Government wants it to be an all singing and all dancing service then it needs to think about different ways of funding it.