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On the offensive: Ros Altmann blames providers for low take-up of Pension Wise

Pensions minister Baroness Ros Altmann has launched a scathing attack on providers’ behaviour post pension freedoms, accusing them of being to blame for the low take-up of Pension Wise.

It is six months since the Conservatives secured a majority against the odds and Altmann took up the mantle of pensions minister.

Since then, data has begun to emerge about how savers are dealing with the freedom and choice reforms. The Government’s guidance service has had an underwhelming launch and politicians have been criticised for overpromising on the new state pension.

In an outspoken interview with Money Marketing, Altmann gives her view on why pensioners will not run out of cash, and accuses providers of diverting customers to in-house services.

Laying the blame 

Launched alongside the pension reforms, Pension Wise was meant to be the brake that stopped consumers making rash decisions with their newfound freedom.

But seven months on, low take-up of the free 45-minute appointments and the controversial redeployment of staff, as revealed by Money Marketing over recent weeks, has dented the guidance service.

Only around one in 10 people who have accessed their pots since April took up the offer of an appointment.

Altmann admits take-up has been muted, but she says providers are to blame for not living up to the spirit of the rules on signposting to guidance.

She says: “Providers need to step up to the plate and do better. I’ve seen wake-up letters, including from companies that I previously considered to be very good ones, and I’ve struggled to find the Pension Wise name and phone number.

“In one case I saw a three-page letter that says ‘this is the value of your pension fund, now you need to decide what to do’. It says ‘giving this letter does not constitute financial advice but you can call our helpline to talk to somebody’.

“The implication is clearly the letter isn’t financial advice but if you call up the provider’s helpline it is – it’s the way it’s phrased. Once you’ve read through the letter you’ve had the provider’s number six times. The Pension Wise number is at the end but you already think by phoning the people at the nice company you’ve had your advice, so why would you go somewhere else?

“I’m concerned the providers are driving too many people to their own in-house services.”

Last month, Money Marketing revealed a Pension Wise guider was sacked by Citizens Advice following a row over staff being used for non-pensions work.

Advisers reacted angrily to the revelation Pension Wise funding was being used on other activity. The service is funded by a £39.1m levy, with advisers set to contribute £4.7m in 2015/16. MPs have also called for information on other areas, such as mortgages, to be included in guidance sessions.

But Altmann believes the service should be restricted to pensions.

“I’m really pleased we’ve reduced the age down to 50. It’s not ideal if the first time people think about it is 55. But I only want Pension Wise to expand within pensions.”

She adds: “It’s in advisers’ interests to boost the take-up of Pension Wise, it’s an ideal opportunity to help people understand why they might want to seek advice.

“If we didn’t have Pension Wise, then advisers would be much worse off. Everyone would just go to their provider and we know what providers are like.”

No ‘nanny state’

Altmann bats away growing concern that pension freedoms are leaving savers dangerously exposed.

Last week, a report from the Social Market Foundation called for an “early warning system” so the Government could intervene if pensioners begin running out of cash.

The report shows 40 per cent of Australians, who have never had a developed annuities market, consume their entire pension pot by the age of 75. The Australian government is currently debating introducing a form of compulsory annuitisation.

But Altmann says the lessons learned in the Australian market do not apply to the UK.

“I certainly don’t think the evidence so far suggests we need to worry about people running out of money. I’m talking with the industry and they are saying their customers are being pretty responsible overall.

“We saw in the first few months there was this rush for people to cash out mainly small pots. Many of those people had other pensions, and they’ve been planning to do that for the last year.

“I’ve met with people from Australia who have been involved with the pension system for quite some time. Their system is very different from ours. Their state pension is means-tested and a lot of people, because of compulsory pension savings, use their pension savings to pay off their mortgage when they retire.”

She adds: “It’s not valid to read across to what’s happening over there and say that means that people will do the same here. Indeed, it’s quite surprising that only 40 per cent in that environment have used all the money.”

Pressure point

The Government has also come under pressure for not producing detailed enough information on  how savers are using their pensions since April.

She says: “It’s very difficult to know all the information at this stage, but we will get it through in the first few years – so we’ll know what people’s pension wealth is and what they are cashing in.

“But, as you’d hope, British people are being quite sensible on the whole. There will always be people who blow the lot in one go, but as long as that’s the minority that’s the whole purpose of the reforms. It shouldn’t be up to Government to tell you what to do with your money.”

One of the most striking trends since April has been the rise of non-advised drawdown. Standard Life has previously told Money Marketing non-advised drawdown was its “fastest-selling solution ever”.

Before she took office, Altmann campaigned for years to boost the number of customers who shopped around for the best value annuity, rather than rolling over with their existing provider.

Last week, the FCA warned it might have to intervene if it found evidence consumers are struggling to compare drawdown and simply defaulting to their provider’s product.

But Altmann does not think history is repeating itself.

She says: “Where I was so exercised before was if you bought the wrong type of annuity you were stuck with it for life. If you buy the wrong drawdown product you can move it – it’s not the same. There was a specific issue about annuities and the fact Government was forcing most people to buy without proper risk warnings and explanations.

“With a drawdown product your money is still in pensions and if you’ve made a mistake you can change it.

“With the old system, unless you had a very small or large pot, you were forced to buy a one-off deal with no explanation for you at all. It’s right we got rid of that.”

Almost as soon as Altmann took office she came under pressure to address widespread misunderstanding about the new state pension.

The pensions industry had always known millions would not receive the full amount – expected to be around £150 a week – when the system goes live next April.

But savers have instead been on the receiving end of the coalition government’s marketing campaign promising a flat amount, without realising they are likely to receive less.

According to a Freedom of Information request submitted by Hargreaves Lansdown earlier this year, only 45 per cent will get the full amount in the first five years following the changes.

So does Altmann hold her predecessor Steve Webb responsible?

She says: “We’ve had to correct some of the misinformation we’ve got now. It’s easier to explain something right in the first place than to correct something that hasn’t been explained right.”

A campaign run by women born in the 1950s and affected by transitional arrangements has also been gathering pace in recent weeks.

Altmann says: “There has been so much misinformation, people are running around saying it’s ‘so complicated; we were told it would be simple, told it would be flat rate and it’s been missold’.

“Actually it will be simple, and it will be flat rate – the complexity is about the past system that we need to calculate and crystallise into one figure from April 2016.

“From the end of 2016, because it will take a few months to have everyone’s National Insurance records, everyone will know their starting amount and from then on they will be building up a flat-rate amount each year regardless of their earnings, what type of NI contributions they make, or what type of NI credit they have.

“We’re also working on digital statements so through 2016 more people will be able to check their state pension online. We want everyone to be able to know what they are starting off with and give them a projection forward if they work five or 10 years longer.”

Alongside the delivery of the state pension, the extension of auto-enrolment to ever-smaller firms is a key responsibility for the minister.

In response to this new auto-enrolment phase, the Government launched a new advertising campaign based on ‘Workie’, the workplace pensions monster, that employers are warned not to ignore.

“With Workie, the idea was we had the really successful ‘I’m in’ campaign but the audience it was addressing was the workers, asking them to stay in, because their firms were doing auto enrolment anyway and probably already promoting pensions.

“We spent £8m a year for the last three years on that. But we needed to move on and recognise that we have to speak to employers now. Yes we want members to stay in, but I’m most exercised about helping those small employers who may not even realise they have duties, so they at least recognise that it’s the law and they have to comply.”

Twin priorities

It is the twin priorities of the state pension and auto-enrolment as well as potential tax relief reform that have put other changes on the back-burner, Altmann explains.

In September, Money Marketing revealed the Department for Work and Pensions was to delay its plans for the pot-follows-member model of automatic pension transfers.

Steve Webb’s pet project of defined ambition – a framework for schemes that share risk more evenly between members and employers – has also now been shelved.

“We know tax relief reform is being looked at, but we don’t know exactly what will happen. Whatever changes are made it will be another thing for the industry to cope with. It’s another reason for saying let’s hold off on big, and even smaller, reforms that aren’t really important now.

“My impression is we won’t look at pot follows member or defined ambition before 2018. It’s sensible to wait until auto-enrolment is fully rolled out. We all know the contributions are low. When we reach the minimum we hope people will do more but my plea is for the industry to understand there’s only so much Government can do.

“We’re handing them these customers, they are there for the taking. Opt-out rates have been incredibly low – especially among the young – with around 90 per cent saying they want to stay in.

“The industry has a chance to engage them and then if they have done a good job people will stay in and save more. If we increased the minimum contribution, if people are not happy with their experience they’ll just opt out. The industry must now step up and take the chance to get their customers to do more with their pensions.”

Providers hit back at minister’s claims around Pension Wise

Providers are refuting claims by the pensions minister that they are directing customers away from Pension Wise.

Ros Altmann says she is concerned providers are “driving too many people to their own in house services”.

But Association of British Insurers director, long-term savings policy Dr Yvonne Braun says: “Providers remain committed to signposting customers to Pension Wise. The low initial take-up of the service reflects the fact that it needs much more promotion. It was not helped that it was launched in the run-up to the general election. Even though crucial details, such as how the guidance sessions would work and the telephone number had not been agreed six weeks prior to its launch, providers had already agreed a standardised communication for promoting the service. What is now important is Government and providers work together to ensure people make maximum use of the service.”

But a senior source at a major provider says: “There are a number of companies, crucially those that distribute through advisers, that have made it central to their strategy to retain customers and were quite blatant about it when Pension Wise was coming together. I was quite surprised at how upfront they were.”


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Roz, very laudable, however, if all you want is for Pension Wise to expand within pensions then put your hand in your pocket, pay for it and stop foisting the bill onto me.

  2. Its clearly obvious providers are NOT directing people to Pension Wise as Standard Life and Scottish Widows have recently confirmed when they announced their ‘non-advised drawdown ‘ was there fasting selling product ever !!!!………….. clear Non advised Drawdown is a conflict of interest.

    Regarding the information sent to clients in the ‘wake up pack’ .. they just enclosed a Pension Wise leaflet

    But Ros, despite your concerns you will do nothing about it as you and the government want to make clients accessing their pensions as easy as possible . The panel on the FMAR confirms this

  3. I’m afraid that its seems to be a stock answer when some bad publicity arises around pensions. Its the provider’s fault… if its not them, its advisers…..

  4. It’s easy to suggest that Pensions Wise needs more promotion, and some providers are probably remiss in not mentioning it in their pre-retirement communications, but I’ve seen umpteen TV ad’s for Pensions Wise, of which the wider populace (90%?) has clearly taken little or no notice. Is there any evidence to suggest that policyholders would take any more notice if Pensions Wise was mentioned in their pre-retirement packs? I suspect not, though it might help.

    What’s needed (IMHO) is for pre-retirement packs to be vastly streamlined and for providers to be banned from mentioning in them any products at all (other than potentially advantageous GAR’s). All they should say is: This is what your accumulated fund is likely to be worth at your forthcoming written retirement date. We cannot advise you on how best to deploy it nor mention any products. To determine what is right for you, you will need personalised advice from a qualified and regulated intermediary. Initial guidance is available from Pensions Wise, a service funded by the industry and free to users, though Pensions Wise does not provide advice, only information.

    How difficult can it be? Why hasn’t the FCA acted to bring this about?

    That aside, Ros Altman’s suggestion that Income DrawDown is okay because anyone who’s bought into the wrong product and/or damaged the capital value of their fund by over-drawing from it can switch to something else is both naïve and simplistic. By the time people realise that DrawDown isn’t the right product, the damage has probably already been done and is irrecoverable.

    The analogy of too many cooks spoiling the broth springs to mind.

  5. Very Interesting article. Ros Altmann clearly has a lot of experience in the Pensions market and hopefully she will help preserve and increase the nation’s appetite to save for their retirement.
    I do however fundamentally disagree with a couple of her statements.

    “If we didn’t have Pension Wise, then advisers would be much worse off. Everyone would just go to their provider and we know what providers are like.”
    Firstly,this is a disparaging comment to many of the good providers out there who are trying to do their best for clients. We all know that the reason Pension Wise isn’t succeeding is because it doesn’t have the ability to offer proper advice. The answer is to make proper financial advice more readily available to the masses. This has been destroyed by increased regulation and the RDR. If the government want people to receive advice they should stop hiding behind the FCA and do something about it. The FAMR needs to solve this.

    Turning to Ros’s next comment “There will always be people who blow the lot in one go, but as long as that’s the minority that’s the whole purpose of the reforms. It shouldn’t be up to Government to tell you what to do with your money.”
    Sorry Ros, it should be up to the Government to save people from themselves. It is not a ‘free for all’ society and that is why we have rules, laws and heavy taxes on de-merit goods (those that would be over consumed if left to market forces). If the Government are prepared to offer attractive tax incentives to encourage people to save for their retirement and take the burden off the state then they have the right to police how this money is spent. Pensions Freedom has gone too far and our country will suffer in the future…..Yes this will be long after the Baby Boomers have spent their retirement funds and the younger generation have had to foot the bill, but it will happen.

    AE was and is, a great initiative to encourage saving for the future. Let’s hope Pensions freedom doesn’t destroy this but allowing people to then blow it all………..

  6. It never fails to amaze me that perfectly sensible and erudite people just become Government apparatchiks when appointed to a bureaucratic position. What is the first rule of bureaucracy? Blame someone else when something isn’t going well. Well done Ros, you have learned that lesson pretty quickly.

    Ros Altmann was always a beacon of sense when not in Government. She now toes the party line – no matter how misguided it may be. Her two statements: “The lessons learned in the Australian market do not apply to the UK.” And “I certainly don’t think the evidence so far suggests we need to worry about people running out of money” will (not maybe, or if) come back to haunt her and I wonder what platitudes she will issue then? That is if she is still around in ten to fifteen years’ time.

    The likelihood of that is slim – so why should she care? Just follow the line, help to snaffle as much tax as quickly as possible and let others sort out the future mess.

    The two faced approach is breath taking. She believes that “customers are being pretty responsible overall”, but evidently not sensible enough to save in the first place and are therefore being dragooned into AE. Those of us with experience at ‘the sharp end’ only know too well that for the great majority of the public common sense flies out of the window where money is involved. That’s why we are one of the most personally indebted nations in the world.

  7. Ros reverting to type and blaming providers for the failure of people to take up a free guidance service backed by a nationwide advertising campaign.

    There are clear rules the providers must follow with regards to signposting Pension Wise. If they are not following these, they should be hit hard. If they are following the rules, and the service is backed by a heavy marketing spend, it is upto the individual as to whether or not they take it. When people start talking about “spirit of the rules” it’s normally a sign that they are clutching at straws. The failure of 90% to take up the free guidance session can’t be explained by simply pointing fingers at the providers.

    Amongst consumer groups, campaigners and the media, there has been a long-standing refusal to acknowledge the depth of research showing the role that inertia plays in poor customer outcomes.

  8. I agree with all the above comments. The only add on is the drawdown products offered by the providers that are so popular – where is the remaining funds being invested? I have not seen any good signposted fund options at any providers so who is giving these people investment advice?

  9. Can not comment on the wake up letters. However, she does not say if the helplines mention Pensionwise.

    Certainly, on the Pension Freedoms in April, Pensionwise was clearly signposted, as we’re IFA’s.

  10. Well maybe government should have worked more closely with the industry before launching such a project!

    You cannot take food off someone’s table and then expect them not only to gracefully accept it but also to pay the person for taking it!

  11. Difficult to have any thoughts on this until we have an idea of, out of the 90% who accessed their pension pots without using Pension Wise, how many used an adviser… A more realistic figure on the take-up rate would be from those who accessed pension freedoms without any guidance or advice at all… Why should providers get the blame for the clients bypassing guidance because they trust their advisers to look after them…?

  12. “It shouldn’t be up to Government to tell you what to do with your money.” I’m sorry to see the Minister come out with such a tired platitude. If the taxpayer subsidises you, then they have the absolute right to put conditions on how you use it. The state contribution is designed to help you not be a burden on the state, then they have a right to try to stop you just burning it all up in a few years. It’s not all your money…that’s the point.

  13. If you ever go to any of the major Australian cities, take a look around at how many 65 to 70 year old taxi drivers are around driving cabs, also take a look at who’s bagging your food shop in the supermarket , and estimate their age.

    They are not still working for love, they have spent out the pension pot and have to work. It’s going to happen here to , it’s just a matter of time.

  14. I can’t remember when I last read an article which contained so many statements by one individual that are patently, obviously nonsense.
    Whatever Ros Altmann used to be (and there was bad as well as good in there), it is clear to me that she has now either
    a) lost the plot entirely or (much more likely)
    b) been seduced into towing the party line by the allure of power and influence


  15. Why the surprise, it took over a decade of advisers pointing out that providers were pushing their annuities and not the Open Market Option. You then are surprised they are not directing consumers to Pension Wise, which will in many cases result in the business going else where?

    The other failure is that you thought the consumer would take such an opportunity willingly. You have not taken into account the consumers apathy, unwillingness to take the time and responsibility.

    In my opinion consumers should have to have the pension wise meeting unless they have an adviser to sign off their preferred product. After the meeting has been held they should be provided with a signed certificate stating they have received the Pension Wise guidance. At this point the consumer can do as they please, either arrange their own or seek advice. The pension provider should then have either a Pension Wise sign off or an adviser sign off. In this way the consumer has at least had some structured information and basic options explained as a minimum.

    Maybe its time to listen to advisers, as we have understood the true nature of the problems and challenges for years.

  16. A couple of thoughts:

    1) “If we didn’t have Pension Wise, then advisers would be much worse off”. Where’s the evidence to support that statement? From data I’ve seen from providers it’s small pots that are being taken, and they are of a size that most advisers would not wish to advise on as it would not be economically viable for the consumer.

    2) It seems a bit convenient just to blame product providers without considering consumer behaviour as well. The powers that be also struggle to understand why the public don’t move their current accounts, re-jig their savings and switch their utility providers. The answer often lies with the consumer not having the time/inclination/appetite to do so. That is not to say that providers cannot do more, but you can’t just lay it solely at the feet of companies all of the time. That’s just lazy. If Government are so concerned, why don’t they just force pension providers to adopt a standard wording/structure for pre-retirement correspondence?

  17. New Client yesterday ” Pension Wise, that’s a laugh, after seeing them the wife and I named it Pension No Wiser, that’s why we have come to see you”.

    Consumers want advice not guidance. I still stand by my earlier comment, as until they saw as the client put it “Pension No Wiser”, they don’t realize they need help.

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