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Is Pension Wise about to come crashing down?

Pension Wise jenga

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?

‘Disappointing’

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.”

In Numbers

£100k – £200k

The most common bracket of pension pot seen by Citizens Advice

70,000

Total TPAS phone customers between April and 31 August.

9,180

Number of total TPAS customers which were Pension Wise appointments

1,000

Estimated number of Pension Wise appointments booked with TPAS that weren’t fulfilled because savers were not available

23,000

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

£1.3bn

Total paid out in cash lump sums, with an average payment size of just under £15,000

Adviser views

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.

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Comments

There are 20 comments at the moment, we would love to hear your opinion too.

  1. People want advice on the cheap. The government and others, like the TUC, don’t like us grubby advisers actually charging the public (we only serve to pay for the FSCS through possibly illegal levies).
    Result? Total chaos. I’ve steered well clear of this area of business until all the **** settles.

  2. Look at the figures 925k enquiries on the site, but only 18k face to face interviews. That is 2%. This reflects the general disengagement with financial advice. This is a free service for punters – yet they don’t make use of it.

    This is no different from the perceived ‘advice gap’ about which so many uselessly agonise. You can bring back commission, employ topless advisers and give away free pens, but the Great British Public are just not interested.

    Stop wasting time and money and just concentrate on those who actually wish to engage.

  3. There are a number of issues being conflated here.

    My understanding is that the information and service from the TPAS element of Pension Wise is outstanding and many advisers simply do not have the depth of pension knowledge as many of the TPAS consultants.

    However the problem is that it does not deliver what most people want – In general, people want three things:
     – Easy to understand information about their options and honest answers to their questions
     = Compare and contrast the options that may be appropriate for their circumstances
     = Help in making the final decision and someone to do the donkey work of setting the agreed solution

    Pension Wise is excellent as step 1, is limited in step 2 because although it can discuss ‘relevant options’ it cannot produce personal illustrations and compare the market.

    Obviously Pension Wise cannot deal with step 3.

    I am like a record when I continually say that the key to getting people the best outcomes is to make sure they have the right customer journey. It is no good having a journey that leaves people a long way from their final destination. I think this is also one of the reasons why robo advice will not work.

  4. “Now organisations such as the Trade Union Congress, the Investment Assocation and Citizens Advice want Pension Wise expanded further.” Maybe they would like to pay for it then.

    I don’t think any further discussions should proceed on Pension Wise, MAS or anything else without the agreement of those that are paying…US! No taxation without representation.

  5. As I mentioned on another thread (which I now can’t find thanks to the woeful new layout), people don’t as a rule walk into government offices and ask for advice unless they are already up shit creek. The low take up rates are really no surprise.

    A voucher system for a £500 session with an IFA would not only have been cheaper and more useful but would have seen a much higher take up rate. Tell someone they can have a free consultation and they’ll assume they’ll get what they pay for. Give someone a voucher worth £500 of professional advice and they’ll think twice before they throw something worth £500 in the bin.

  6. I work as a Pension Wise guider delivering face to face guidance via CAB. The take up of the service has been very low, most CAB guiders delivering on average only 3 to 4 appointments a week. As a result of this low take up a lot of the CAB delivery centres have took it on themselves to have their guiders doing ‘Generalist’ CAB work, in some places 3 days Pension Wise work and 2 days none Pension Wise CAB work and are being forced onto other training courses to deliver such none PW advice. All of which will eventually is paid for by the Adviser and Financial Services community. This has lead to a lot of dissatisfaction among PW guiders with many leaving and some refusing to do none PW work. So if your unhappy to have to fund the PW service via your levies, not only are you funding PW but you are also paying toward generalist CAB work. I am still trying to find out why the Treasury are allowing this?

  7. All a bit of a mess isn’t it? Act in haste…….!

    Anyway, so when all of the noise and deliberation between the various ‘consumer’ bodies has died down, they will presumably agree that 1) The only people who can give proper insight and guidance are actually regulated financial advisers (it’s actually what we are trained for) and 2) It comes at a price, in no small part due to the heavy cost of regulation and liability protection.

    So there is a solution, but it remains the elephant in the room!

  8. What F A says is very interesting, and sounds like fraud to me, we as IFA’s are being asked to fund this service, not general CAB work. I said right from the outset a voucher system would have been the best solution. No set up costs, useful source of income for IFA’s (on which they would probably pay 40% income tax anyway), only people who want to engage end up costing anything, and the clients get a much better outcome than this halfway house they are getting at present. We need more IFA’s to be vocal about paying towards something that is of no use to us in anyway.

  9. Problem is customers want to be given advice, I.e told where to sign by someone who is then on the hook if it goes wrong.

    Pensionwise is, and my opinion should remain, an information service.

    If it starts giving advices, then that will create a whole host of problems.

  10. I am with Harry, just stick to those who value your service and pay for it, the rest are not our problem and we are deluded if we think we can have any influence. Remember the little Dutch boy, in the end there were too many holes.

  11. The Trade Union Congress, Investment Assocation and Citizens Advice are bound to want Pension Wise expanded further as its paid by someone else, us soft b’stards!

  12. Rt Hon Sir Arthur Streeb-Greebling 12th September 2015 at 12:37 am

    I think the problem here, is that IFA’s are not represented by this county’s strongest and most vociferous trade body: the BMA. Can you imagine cut price, unqualified doctors?

  13. The simple problem is the public, by and large, do not trust financial advisers anymore, (for historic reasons). Yet sadly the level of technical knowledge and professional ability has never been higher. So maybe this needs a new way of thinking.

    Maybe a combination of the voucher scheme mentioned above but paid to vetted and suitably qualified (level 6+?) IFAs who are willing to complete steps 2 & 3, as set out by William above, without charging extra fees (including “product fees”) via a partnership between the CII (who collect £240 annual fees but currently do next to nothing for advisers in return) and CAB to deliver the right client outcomes. If the public then start associating the CII with trusted advice it might go a long way to rebuilding trust (apologies to other professional bodies not mentioned and please feel free to jump in front of CII).

    This needs more than the CAB, MAS or PW it needs coordinated support from a professional financial advisory body and a Chartered one at that.

  14. What is level 6+?.

  15. It does seem remarkably optimistic to expect the government to spend our money wisely to form a body to deliver guidance on a subject about which it knows precious little. I do not believe that we should pay a single penny from our business activity towards this service as currently it is simply a public information service. It is no more relevant to me than me paying for a doctor or a fireman because I am a Financial Planner. However, if the service delivers something helpful and useful to members I do not mind paying towards this as a taxpayer out of my earnings rather in the way that I happily pay my taxes to fund schools, ambulances, hospitals, fire service, police service, binmen etc. In this case If I do not then like what my tax is being spent on I can vote against it or make representations to have things changed or abolished. As it stands we as advisers are asked to (or rather required to) pay a substantial part of the cost of a service which simply does not relate to what we do in a meaningful way. I object but cannot raise my objection. I do not want my earnings to fund this service but have to give up some of my earnings anyway.
    I have nothing against a public information service like this, but agree with some of the other contributors that a voucher system would be better. The taxpayers funds would then be used to help those who value the service, and the IFAs/Advisers receiving the voucher would help towards the cost by paying corporation tax or income tax on the income produced by the voucher. Those advisers who want to belong to the scheme would have to register and would crucially be prepared to offer the kind of guidance required, and at an agreed level of income. I don’t agree with Tony S saying that the implementation of and provision of advice should be provided at no extra cost but it could be that those advisers who sign up offer a tiered, fixed price service. There would still be a need for additional capacity for telephone or internet based signposting service, which could be provided on a much reduced scale by Pensionwise, but at least we could reduce the scale of expenditure on this service. And crucially we would not be charged for something that is not anything to do with us.

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