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Advisers back Pension Wise cuts amid low guidance demand

Pension Wise jenga

Advisers have come out in favour of reductions to the budget and staff count for Pension Wise, although some question the timing of the decision.

Money Marketing revealed last week the service would cut just over a third of the numbers of guiders, shortly after the FCA announced its budget would drop by a quarter.

For 2016/17, the industry will pay £22.6m towards funding Pension Wise, down 42 per cent from £39.1m the previous year. Advisers will pay £2.7m, compared with £4.7m in 2015/16, while the levy has also been reduced by a £7.3m underspend.

Informed Choice managing director Martin Bamford says: “We always expected there to be a big early demand for Pension Wise, but that was never going to be sustained so it makes real sense for them to cut back resources.

“But because of the demographics we are going to have an increasing number of people reaching retirement soon, so I suspect they will quickly need to find a level that is sustainable.”

Clearwater Financial Planning managing director Duncan Carter works with his local Citizens Advice Bureau in Preston to provide money support, but says he advised the centre not to apply to host Pension Wise sessions.

He says: “I always thought that it was always going to see a surge of people coming in for pension freedoms, but that would be a short-term thing.

“At a nearby CAB in Liverpool, they took people on to offer the service and they had to let them go because they weren’t getting enough enquiries.”

Carter adds: “It was an expensive but little used service and the likes of us were left picking up the bill, and I think there might even be more reductions to come.”

However, Master Adviser partner Roy McLoughlin questions the timing of the move in the aftermath of the Financial Advice Market Review.

The FAMR proposed a raft of measures to improve access to advice, but McLoughlin says Pension Wise was always likely to maintain a role due to a shortage in the total number of regulated advisers.

He says: “Where are the great unwashed going to get their advice from? I think it’s very strange, because there are just not enough advisers out there.

“There are two massive things happening in pensions in the shape of the freedoms and auto-enrolment, and there are going to be more people with questions than we have ever had before.

“These cuts means there’s an ambiguity as to how those can be answered in future.”

Expert view

What came out of the Financial Advice Market Review was that there was a clear need to encourage people to seek help in looking at their options, otherwise they are missing out or overpaying tax, or getting caught up in scams.

All the indications were that the Government is still worried a lot of people might rush in to things assuming they know what they want to do but quite often paying more tan than they might want to.

So on the one hand, the Government is emphasising the need for people to get help in considering their pension options, be that full advice or guidance.

And it seems an odd time to be cutting back on that guidance.

But on the other hand, the take-up has been poor so you can understand them cutting back the service to meet the need.

If the Government has accepted this is what the demand is going to be then it’s a sensible decision but should they be accepting that or trying to get that demand increasing?

When you look at the number of people who seem to be getting scammed you do wonder whether it’s right to give up like this.

It may well be that the new guidance service will have a different approach and there could be more automated elements to that, and the Government is thinking ahead and can manage with a lesser service.

But the last thing we want to do is end up in a situation where Pension Wise is under-resourced. If then have to build that service back up again then the Government will end up looking pretty stupid.

Malcolm Mclean is senior consultant at Barnett Waddingham

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. A system of redeemable vouchers for an initial consultation with an authorised and qualified adviser would have been VASTLY more cost effective and quite possibly much more popular. For a start, if nobody applied for any vouchers, the cost of such a scheme would have been minimal and only a few administrative staff would have to be laid off. Would that not have been the most pragmatic strategy?

  2. “Advisers back Pension Wise cuts”. And this is news? Which adviser wouldn’t be in favour of these cuts?

  3. Can’t see a voucher system working, I suspect all that would happen is that the free initial meeting would suddenly cost the price of the voucher. It would require very close policing.

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