View more on these topics

Just 2.5% take up pensions guidance in L&G pilot

Legal & General’s pilot of pensions guidance saw just 2.5 per cent of retirees take up the offer, sparking fears that the vast majority of people will receive no help when accessing the new pensions freedoms, Money Marketing can reveal.

The L&G pilot was launched in conjunction with The Pensions Advisory Service and LEBC between April and May and contacted 9,000 individuals coming up to retirement.

The overall take-up rate to letters issued was just 2.5 per cent, meaning only 225 savers received pensions guidance.

The scheme was launched through three channels with take-up of 2.6 per cent through TPAS, 2.3 per cent through L&G and 2.8 per cent through LEBC.

Those who received the wake-up pack given to people with less than six months until retirement saw the take-up rate increase to 4 per cent.

From next April anyone aged 55 or over will be able to access their pension pot in full and have the right to free, face-to-face, impartial guidance.

The guidance regime will be delivered by TPAS and the Money Advice Service and funded by a levy on advisers and pension providers. More details are expected shortly.

Some have raised concerns that the Government’s guidance guarantee could see take up as low as 10 per cent next year and questioned whether it should be made compulsory.

L&G individual retirement solutions director of strategy Tim Gosden says: “We expect the uptake to improve next year as there will be a media build-up. It was very early on and we now know we have to communicate about the guidance guarantee in written and verbal communication. The objective is to make aware consumers about the options and choices instead of making a recommendation.

“It will be difficult to get around consumer apathy without making it compulsory. The choices are far more complicated and there are so many more opportunities to make big mistakes such as people cashing in their pots, which could have a significant effect. It’s freedom and choice but also a minefield which is why the guidance guarantee is so crucial.”

Gosden suggests sending out separate letters alerting consumers to the guidance guarantee, instead of the FCA proposal to include it in the wake-up packs.

L&G research on the guidance guarantee earlier this year found that when it was explained to them only 11 per cent of consumers discounted it completely. In addition 39 per cent would consider opting for a financial adviser.

Hargreaves Lansdown head of pensions research Tom McPhail says more engagement, media campaigns and advertising will have a big impact on take-up before next April.

He adds: “Even if we see better take-up than L&G, there will be a very substantial proportion and possibly a majority who won’t take guidance. There is a critical task for regulators, especially the FCA, to have robust regulation in place to protect propel buying retirement income solutions without having received guidance or advice. This has the car crash potential to make the Blues Brothers look like a health and safety video.”


News and expert analysis straight to your inbox

Sign up


There are 11 comments at the moment, we would love to hear your opinion too.

  1. Legal and General…… the company that argued that the AMC on group schemes should be nearer 0.5% than 1% when Steve Webb was deciding his cap before announcing the 0.75% cap.

    Result commission is scrapped, (even on schemes with a lower than 0.75% AMC) and employees who were getting advice paid via commission will no longer get any advice if their company is unwilling to pay for it.

    So Legal and General have helped create an environment where even less people from the 97.5% pool (100% – 2.5%) that they couldn’t attract through their trial will get any advice at all.

    But Legal and General haven’t been interested in small companies or their employees for years

  2. Not surprised at all. It really does amaze me that the same mistakes are repeated time and time again. The real irony is that even a baby learns that if it hurts (does not work) to avoid it next time.

    We are told 40% of the population do not understand percentages, that most do not read what is put in front of them. So the solution to the advice gap is send consumers long. lengthy, complicated reading material. That’s really going to work am sure.

    How many millions will be wasted, how many millions will be spent lining their pockets with jobs for the boys before they actually listen. If they had provided everyone retiring with a £100 voucher to seek advice, the £20 million allocated would have been far better spent. The consumer would have had advice not guidance, advice which would be tailored to them, made simple and clear for them to understand, including the RISKS.

  3. Good article however I would take issue over the piece about the FCA having regulations in place to protect those who act without guidance or advice. If a member of the public wants to go it alone, it has nothing to do with the FCA, nothing at all. They are there to regulate the regulated sector, not the public so no robust regulation is needed. They have got enough to cope with, about which they know little, without adding more to the menu of what they cover.

  4. @ Martin Evans – You make a very valid point ref the voucher. One question though. I presume the £100 voucher is for guidance only, not full advice? I am sceptical that everything we need to do and cover off for advice could be done for £100.

    If the guidance provided was really simple like “Mr client, take your tax free cash and put it into an ISA and in your situation go get an annuity with the rest of the pot. If we can establish the level of risk you are comfortable with I can point you in the direction of a suitable asset allocation then you will be to make your own judgement and decision and off to find your own products”. I imagine I could do that in about half an hour but not much more and that is about all £100 is worth in terms of time if I have no regulatory responsibilities and potential FOS bill etc.

    That aside as I said in a post earlier in the week there is likely to be only a very small minority of people who will use the guidance, as for the rest? It will be the same in the post freedom world as it is now for the huge majority.

    Still it is a great vote winner as those who don’t know any better will think its a gift.

  5. Martin got it right about the £100 voucher. If 50% didn’t take it up, you could have made it £150 next time around.

    The scheme will need serious publicity – probably including a TV campaign.

    If we’re going to do this thing, for goodness’ sake let’s do it properly!

  6. Seems like one of the most ill-conceived plans even for posh George. Don’t tell anyone about what you’re about to announce, misrepresent what you are announcing as something it isn’t, make people who will not benefit in any way pay for the plan, don’t listen to sensible objections to the plan, plough ahead anyway, let people with no qualifications or real experience implement the plan, and then find that a miniscule proportion of people have any interest in using the plan. Well done George you arrogant fool!

  7. All this could have been avoided if only the FSA/FCA were to declare OM as the default option for all funds approaching their vesting date. Why has it not done so?

    And what, as on so many issues, is APFA trying to get done about it?

  8. And still Treasury has not published a cost/benefit analysis!

    For goodness sake pull this nonsense before it costs real money

    @Julian Stevens spot on, that plus the previously mentioned “voucher” and the problem is solved

  9. @Martin Bamford, I cannot agree that the problem is then solved – there is no solution to the problem in many cases. Trouble is the FCA thinks that everything has to fit into a little box. And yet we work in a world where the future is uncertain, so advice/guidance/instruction can only go so far in helping clients with their retirement choices. Good advice can turn out to produce a poor solution, and bad advice can perversely lead to a better result. The sooner the FCA, the Treasury and politicians realise that there is no magical solution to how to invest and divest money the sooner our regulatory bodies can apply some common sense and pragmatism. I love working for clients but cannot but ruefully smile at the silliness of our regulatory framework.

  10. @Brian Gannon me Nick, him Martin

    Ah magic solutions, I agree there are none.

  11. £100 would cover the cost of a short meeting explaining the main options highlighted within their guidance pack, the advantages and disadvantages in simple terms. Thinks like, running out of funds, inflation, tax, investment risk and such, things Mr & Mrs consumer really do not take into account.

    This could be undertaken in a set format with agreed documentation and what is to be provided. It would then be up to the advisers to register if they wish to take part and offer this service.

    In this way the consumer will understand the dangers and at least have been offered the opportunity of receiving advice . It will then be up to that individual if they then want to pay for full advice and service.

    We all know that we can explain in thirty minutes to any consumer far more effectively than them spending hours reading something they do not understand.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm