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Follow the money: Pension Wise row deepens after employee dismissal

A former financial adviser who became a Pension Wise guider as a career “swansong” has been sacked by a Citizens Advice branch following a row over how guidance staff are being used.

The case shows issues uncovered by Money Marketing last month at another bureau have spread to other offices delivering face-to-face Pension Wise appointments.

Shadow pensions minister Labour MP Nick Thomas-Symonds says the Government urgently “needs to get to grips with Pension Wise”, while advisers are calling for an independent inquiry “to find out what is really going on”.

The Government-backed guidance service is funded by a levy on financial services firms expected to benefit from the sessions, set at £39.1m in 2015/16. Advisers will contribute £4.7m in the first year, while the Treasury provided a £20m start-up grant.

Yet out of around 200,000 who are known to have used the new pensions freedoms, just 10 per cent have taken up the offer of a Pension Wise appointment.

So, is Citizens Advice up to the task of running appointments across its network? Does the Treasury have a good enough understanding of how the Pension Wise budget is being spent? And can the guidance service, the key safety feature of Chancellor George Osborne’s landmark pension reforms, survive in the face of growing political and industry dissatisfaction?

“Isolated incident”

Last week, Pension Wise agent Trevor Gibbons was dismissed from the Staffordshire South West Citizens Advice branch after a two-week suspension for refusing to undertake non-Pension Wise training.

Gibbons feared his delivery centre would follow in the footsteps of Derbyshire Districts, which last month Money Marketing revealed had been using staff funded by the Treasury on work unrelated to pensions.

Citizens Advice said the Derbyshire case – which saw Pension Wise workers redeployed on general enquiries and providing debt guidance – was “an isolated incident”.

Minutes of meetings in July and August, seen by Money Marketing, show management at Staffordshire planned to ensure all Pension Wise staff were working towards the Certificate in Generalist Advice Work and a “programme of additional training outside the scope of Pension Wise”.

The rationale behind the move was “while the volume of clients has increased, the number of appointments was still lower than initially anticipated, leading to spare capacity within the team”.

However, a Citizens Advice spokeswoman says despite the extra training, there was never a plan to redeploy staff onto general Citizens Advice work.

The minutes report uneasiness among staff that “the Treasury may take a negative view of funding being used for purposes other than Pension Wise”. The spokeswoman says: “Citizens Advice Pension Wise staff are specifically dedicated to working on the pensions guidance service. Each Pension Wise delivery centre across the Citizens Advice network has confirmed that staff are only working on Pension Wise.

“Citizens Advice Pension Wise staff may be asked to undertake additional training if it is of relevance to their role as guiders, as agreed with HM Treasury. The additional training means the service better supports consumers, with staff able to identify people who might need extra help on issues like benefits or debt and can refer them to services which can support.

“Delivering the Pension Wise service takes precedence and any training is completed when a staff member isn’t busy with guidance sessions. Additional training is not to enable guiders to deliver any service other than Pension Wise.”

Gibbons was dismissed by Staffordshire following a disciplinary hearing. A letter from panel chair Claire Davis, seen by Money Marketing, shows he was sacked primarily because his refusal to undertake training was deemed gross misconduct.

Davis says: “The redeployment of staff onto general CAB work was never the intention and this has been explained to you on several occasions. Given the Pension Wise caseload was far below anticipated, the management felt there was scope for additional training and that closer involvement in the CAB service would have benefits in both directions.”

She adds allegations of misappropriation of Treasury funds were “groundless” in the case at Staffordshire.

Gibbons says: “Delivering the face-to-face pension guidance was a perfect fit, a way of giving something back by helping people understand their pension options and I got great satisfaction from it.”

He adds: “If I had known that CAB was going to force me to train as a generalist adviser while being employed as a Pension Wise guider I would not have taken the job on.”

Advisers are calling on the Government to place the service under renewed scrutiny.

Wingate Financial Planning director Alistair Cunningham says: “It reminds me of when you get to April and May and you can’t drive anywhere because the council are digging up holes in the road because they have to spend their budget and if they don’t the budget gets cut. I wonder whether a similar thing is happening with Pension Wise.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “We need an independent inquiry to find out exactly what is going on here. This can’t be swept under the carpet.”

One in 10

The problems at Derbyshire Districts and Staffordshire South West both stem from the low take up of the guidance service since it was launched in April.

Following a pilot run by Legal & General in October 2014 which found just 2.5 per cent took up the offer of guidance, experts warned it was likely to be running under capacity.

FCA and Treasury figures show just one in 10 people who have used the Chancellor’s pension freedoms exercised their right to a 45-minute appointment.

More than 200,000 people accessed their pension in the first three months of the freedoms.

But while the Pension Wise website attracted 1.5 million unique users, only 20,000 people received telephone or face-to-face guidance.

Despite fears of low take-up, the Treasury increased the levy to meet running costs for the first year of the service a month before the freedoms came into force. In January the figure stood at £35m – in addition to a £20m start up grant provided by the Treasury – but this was raised to £39.1m in March.

A wide range of FCA-regulated firms, including life insurers, portfolio managers and financial advisers, are contributing to the levy with the exact amount calculated based on their “potential benefit” from the service. Advisers are contributing 12 per cent, or £4.7m.

Apfa director general Chris Hannant says: “The organisations running Pension Wise need to give confidence to those paying the bills the money is being used for the right purpose. Working out which groups are benefiting won’t be an exact science. You can look at things like changes of money on deposit or if annuity or drawdown sales have gone up or down but it will be slightly rough and ready. It’s much tougher to track if the people going through Pension Wise are leading to more people going to advisers in the long run.”

Service creep

In its first report in this Parliament, published in October, the Work and Pensions committee said Pension Wise should be expanded.

MPs say it should consider savers’ property wealth, benefit entitlements, tax implications, care costs and debts.

The service has already grown from its original design. In July, Money Marketing revealed the Government was widening eligibility from over-55s to over-50s and scrapping a two-week pause between bookings and appointments.

The Pensions Advisory Service chief executive Michelle Cracknell has previously said her staff – who provide Pension Wise appointments over the phone – have had training from the Council of Mortgage Lenders in response to an increase in users asking about housing issues.

Reid says there may need to be changes to the way the service is funded. He says: “There has been service creep for a while, without a tremendous amount of thought. We’re heading towards an FSCS situation where you’re levying costs dependent on use, so if people need more help on debt than straightforward pension issues, the banks pay more. Maybe that’s a more elegant solution. Otherwise advisers will start thinking why should I pay when lenders, for example, aren’t? If no one’s using it we shouldn’t be paying for it.”

Bill Land quit his post as project manager at Derbyshire Districts when his team of guiders were put onto rotas that included non-pensions work. He says rather than redeploying staff, the bureau should have put more resources behind promoting the services.

In the run-up to the reforms the Treasury’s marketing campaign was cut short by purdah, with television adverts being pulled for nearly two months around the general election.

Land says: “I’ve got project management experience across lots of different industries. I would have been advising that we have a very open discussion with the Treasury and say this is the situation, what can we do about it? Not, as has happened at Derbyshire, let’s keep this to ourselves and redeploy people.

“There’s no way the contracts can be changed because people signed up for a year but there could have been some renegotiation. There also needed to be a big promotional push. Our guidance workers were doing three or four appointments a week, so we got them speaking to local employers and local organisations.

“I’ve worked with Government departments before but Citizens Advice and the Treasury is probably the worst combination I’ve come across. The organisation also has the embarrassment of funding a programme nationally where each appointment is costing about £500 because there are so few appointments happening.

“The issue is they are all run as separate charities and the fact is charities are run very differently to commercial businesses. When I came along I wanted to run it more akin to a commercial organisation – which is what the Pension Wise workers expected as former professionals themselves.”

Labour shadow pensions minister Nick Thomas-Symonds says: “The Government needs to get to grips with Pension Wise. The Work and Pensions committee report criticised Pension Wise, stating its website is “not fit for purpose” and its guidance is “currently too narrow for too many consumers”. It also needs to provide effective oversight and scrutiny of how it is being run.”

Pension Wise is due to move from the Treasury to the Department for Work and Pensions by April 2016.

Timeline

January: Government guidance service named Pension Wise

January: Levy set at £35.1m for 2015/16, advisers will contribute £4.2m

March: Levy raised to £39.1m, advisers will contribute £4.7m

April: Purdah restricts advertising campaign as service launches

July: Government expands Pension Wise from over-55s, to over-50s

September: FCA figures show over 200,000 have used the freedoms since April. HMT says 20,000 people have had Pension Wise appointments

October: MM reveals Derbyshire Districts Pension Wise staff have been redeployed on other activity because of low appointment take up

October: Work and Pensions committee says Pension Wise should be expanded beyond pensions and brands the website “not fit for purpose”

November: MM reveals Staffordshire South West guider is sacked after refusing to undertake non-pensions training

Inside Pension Wise

I joined Pension Wise to deliver the face-to-face pension guidance through Citizens Advice Bureau in Staffordshire and although employed by them, I was well aware the funding to provide the service came from the Treasury and the industry.

I started in March and was on a one-year contract, which would automatically end on 31 March 2016. I was a full-time guidance guarantee agent on an annual  salary of £18,000, which was the bare minimum they could pay me. However, I did not see this as a long-term career but something that may last for a couple of years or so.

Joining Pension Wise was supposed to be the “final swansong” of my career, having spent 33 years working in financial services and taking early retirement at 59 last year. As a professionally qualified person and like many other financial advisers I have an array of CII qualifications, as well as the QCF Level 4 Diploma.

I am used to dealing with people “of a certain age”, those who were retired or coming up to retirement and my clients always used to say I explained things in a way they understood.

Delivering the face-to-face pension guidance seemed like a perfect fit, a way of giving something back by helping people understand their pension options and I got great satisfaction from it.

In July I became aware that the Derbyshire Pension Wise delivery centre staff had begun working on other Citizens Advice generalist work, which in my opinion was not what the Treasury funding was for. Money Marketing reported this and Citizens Advice at national level said it was an isolated case and all staff were now only working on delivering the Pension Wise service.

However, at the same time my own delivery centre, Staffordshire South West, had put together a weekly training rota, which was outside the scope of Pension Wise.

I refused to do this, stating they should not be using Treasury funding for non-Pension Wise activities. Because of my refusal I was immediately suspended and subsequently dismissed for gross misconduct.

If I had known Citizens Advice was going to force me to train as a generalist adviser while being employed as a Pension Wise guider I would not have taken the job on.

Treasury funds should not be used for anything other than what they were intended for, delivering Pension Wise guidance.

Trevor Gibbons is a former adviser and Pension Wise guider

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Comments

There are 21 comments at the moment, we would love to hear your opinion too.

  1. The big problem for an ex IFA is becoming what is in effect a Government employee. After spending a career thwarting bureaucrats, becoming one is no easy transition.

  2. Put another way, as many as 90% of the (around) 200,000 people known to have used the new pensions freedoms (presumably to encash their pension funds) declined the offer of a Pension Wise appointment. And what of the 10% who did take up the offer? What proportion of those people ignored “guidance” that, in most cases, would very probably have majored on and, at the very least, strongly suggested the un-wiseness of so doing and encashed their funds anyway? It’s highly unlikely to have been none, is it?

    If we assume that percentage is, say, 50, and that, for 95% of people, encashing their pension funds is highly likely to lead to income shortfalls later, we can conclude that Pensions Wise, at a cost of £39.1m, has failed to dissuade 95% of 95% of people from doing the wrong thing ~ which is a pretty horrendously high percentage, is it not?

    And where’s the payback for advisers forced to stump up £4.7m of the total £39.1m? Because, of all the people determined to encash their pension funds, either without guidance or in spite of it, hardly any will have availed themselves of the services of a regulated adviser, will they?

    The term white elephant springs yet again to mind.

    • Julian, you assume that every single person who follows their own devices will do the “wrong thing”? I think there’s a career for you at Pension Wise. Or any paternalist quango of your choice.

      Even the most sensationalist headlines about people cashing in their pension funds have suggested an average withdrawal in the region of £10,000 – £15,000. An amount almost certain to be within the basic rate tax band, and which does not represent a meaningful amount of lost lifetime income.

      • ABI’s Biennial Conference, ABI Chairman Paul Evans said: “The ABI has announced today that in the first six months, customers have received £2.5bn from their pension savings as a cash lump sum – averaging £15,000 each. In the same period customers have invested £5bn to buy an income – averaging £60,000 each.”

  3. Has anyone actually done the maths or do civil servants not have to deal with budgeting? The budget is £39,100,000 divided by 20,000 people is £2000 per person for an appointment that lasts perhaps an hour and the guider is being paid about £12 per hour. Where does the balance go?
    How do these senior people come up with these figures and how do they stay in a job when they are incapable of simple maths.

  4. Well, any fule knos what happens after the swan has its “swansong” – it dies.

  5. This is so typical of modern day government thinking. Throw a pile of money at it and say “aren’t we great?” It is ridiculous that any money was used at any time for no pensionaries work. Everybody knew before day one it was going to be used so much more than officials anticipated.It was therefore a great opportunity for the CAB to get a pile of money in and extra staff to do some work for them that did not come out of their budget.
    It has been quoted that so far each appointment has cost £500 for a 45 minute appointment (equivalent to £667 per hour). For that sort of money those individuals who used pensionwise could have had regulated advice from fully qualified advisers which would have been a hell of a lot more in-depth, detailed than pension wise could ever hope to achieve.

    I would suggest that if you did a poll amongst people coming up to taking benefits and asked them if the government paid a professional financial adviser even £300 to provide you with 3 hours of their time to give regulated financial advice around your pension options their would have been a hell of a lot better take up than 10%. I am sure there would also be advisers who would provide their services for £100ph for their services around only this area of financial planning. The users trust of the adviser should be at a high level as the govt are paying the adviser regardless of what the outcome is

    Users would have received proper advice and not guidance from the get-go & they would have a much clearer understanding of their options as a result thereof. They would, I suspect, on very many occasions probably have had the adviser able to implement the advice for them at no extra cost. They would also be protected fully by the regulatory safety net that we all subscribe to. Everyone is a winner and if we are all honest about this pots this size the solutions are not usually rocket science.

    I would argue that any adviser should be able to do the required work on these (generally) simple cases in less than 3 hours from start to finish. I think one would be hard pushed to take longer than that to advise a person on a suitable course of action for a pension of up to £50K. If you wanted to mercenary about your service, you could stop short of implementing it for them but give the user a letter to send to a provider instructing them what they wanted to do with their pot and let them DIY it from there.

    If you stumble across the old larger case, of which there will be no doubt some, then you confirm to them that is the case and that you would need to be paid by the client/AC for the extra time incurred etc. They could either take you up on that or go elsewhere to find the next adviser says the same thing. These would be a small minority of situations, however.

    I wonder what the Govt and co would say my thoughts?

  6. The effective cost of Pension Wise does not just extend to the £39.1m. Pension Wise uses its marketing budget to promote itself on google adwords, taking space that could be available to regulated firms and driving up costs across the board.

  7. Mr Gibbons got about a fair bit in his career as an approved person, didn’t he?

  8. @Marty Y: There is also a psychological advantage of a voucher system which everyone seems to have overlooked. If you tell someone “Come to the CAB for a free guidance session”, people won’t. Because they assume they’ll get what they’re paying for, nothing. People don’t go into a government or charity office for free advice unless they’re up shit creek.

    Give someone a voucher which reads “£500 of professional financial advice”, however, and they won’t throw it away. Imagine the text “£500” in big embossed gold letters. No-one’s going to throw away something that says it’s worth £500. I’ve got a £10 voucher for a local sports shop on my dresser that’s been there for two or three years. I’m never going to use it, their service is dreadful. But I haven’t been able to throw away something worth £10.

    A voucher system would have been so much cheaper, simpler, and people would have actually used it. But the government doesn’t seem to want to tell people that professional financial advice is of value.

  9. Sascha Klauß ~ even a small fund encashed may be severely damaging to the policyholder’s long term financial health, particularly if that’s all s/he had. People should be dissuaded from encashing their pension funds no matter how modest and instead encouraged to build on them.

    The 200,000 people who “used the new pensions freedoms” may not all have encashed them, though of those who didn’t, would non-advised DrawDown have been a good idea?

  10. The whole point of the changes was twofold, firstly to allow these funds to be spent, and secondly so that HMRC could take a slice.

  11. It’s patently obvious why only 10% take up the pension wise face to face offer. They just want the money out of their pension. They do not want a chat about all their other pension related gobbleygook options. Show me the de monet !!!

  12. If pension wise/CAB are only prepared to pay £18,000 for advisory roles (even if they are unauthorised) is it not surprising that the whole thing has descended into utter farce. What’s that saying about paying peanuts?

  13. SS – Just for some clarity, my team of “monkeys” have between them four CII Dip PFS, to date four passes of R08 and 3 currently studying for R08. All are paid not the highest but personal circumstances mean salary is not the main driver, rather helping clients (or rather users) is.

  14. GH – All those qualifications but the ‘monkeys’ actually running CAB would still rather have them doing non Pension Wise work, such as generalist/debt advising or training to obtain the ‘certificate of generalist advice work’. Shame they don’t value them the same as you do!

  15. The article says “any training is completed when a staff member isn’t busy with guidance sessions…… ” and refers to training on non Pensions work which makes them more useful to CAB etc when their contract ends as Pensionwise advisers, so we are funding their training when we struggle to fund out own staffs training!

    I have often been told by other businesses, if someone isn’t busy doing the job they are supposed to be doing, they need to make sure they at least look like they are doing something otherwise their line manager is going to have someone senior breathing down their neck saying they are overstaffed and can make someone redundant.

    The problem here is that CAB are over worked in other areas, but funding for Pensionwise whilst met from a Treasury grant, has to be repaid by advisers like me I believe, so as someone else said redeploying staff quitely for something they were not suppsoed to be used for is a jolly wease.

    He who pays the piper is usually the one to call the shots, i.e. if the staff are underutilised, then either WE should be able to ask for someone to be made redundant (probably not appropriate or fair with a 1yr contract) OR, they are deployed but the cost of their redeployment should NOT be born by regulated advisers, it should be swallowed by the Treasury with no repayment. Unfortunately this will never happen.

    As many said before it’s launch and with MAS, Pensionwise should have been funded by general taxation, that way it would at leasy have been accountable. Quangos are not accountable and forcing levy payers to meet their costs and then messing up is not acceptable when we’d like to spend more on training our OWN staff.

  16. Sadly the average pot is worth less than £20K so unless they have some very good guarantees they might as well take the lot

    • Yes Anthony, pre pension freedoms I was arguing that the triviality limit should be increased and flexible drawdown maintained but reduced. a Triviality limit of about £30k-£50K and flexible drawdown at £12-£15k indexed annually would have sorted out the uneconomic small cases and protected the taxpayer by making sure and significant pension savings were used for such purpose.
      I suppose an even better option to triviality would have been enabling everyone to take up to a higher triviality limit in lump sum form (taxable) so that small port users could take it all, but those with middling funds didn’t feel seen off by not being allowed to take the same in lump sum form.
      The pension freedoms really removed all barriers and possibly too many, but we are where we are now and I would rather not see any further change now and just have some bedding in.

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