Just 2 per cent of customers made contact with pension guidance service TPAS after being prompted by provider Royal London in wake-up packs sent over the last three months of 2014.
The poor take-up rate mirrors Legal & General’s guidance pilot last year, which also found only 1 in 50 people made contact after being told they could use the free service, stoking fears thousands will avoid guidance and regulated advice and make poor decisions following the introduction of new pension freedoms from April this year.
TPAS is delivering telephone support for the guidance, branded as Pension Wise, while Citizens Advice is running face-to-face service. The official Pension Wise website launched yesterday.
Commenting following the publication of the group’s new business results, Royal London group chief executive Phil Loney says: “Customers are not ready for the new pension freedoms, which have been thrown into place in an entirely unrealistic timescale.
“I fear that many will make the wrong, often irrecoverable decisions about their retirement and this will result in some very poor outcomes.”
Loney adds the FCA’s new ‘second line of defence’ rule, which will require ceding providers to ask a series of questions of retiring customers, “will not solve the problem”.
He adds: “George Osborne’s pension reforms have the potential to become famous for helping people to improve their retirement incomes but without plentiful and affordable financial advice they risk becoming an infamous example of political bungling.”
Royal London’s new life and pensions business sales were up 39 per cent year-on-year, from £3.46bn in 2013 up to £4.83bn in 2014.
Of that, group pension sales rose 83 per cent from £1.2bn in 2013 to £2.2bn in 2014, while new individuals pensions business grew by a quarter, from £1.1bn to £1.4bn. Drawdown sales surged 43 per cent, from £546m to £781m.
However, growth in the asset management business was slower than the previous year. There was £2bn of new business in 2014, down from £2.5bn in 2013.
Likewise, the Ascentric platform saw new assets dip 26 per cent year-on-year, from £1.7bn in 2013, to £1.2bn in 2014.
However, total group funds under management rose 12 per cent, from £73.5bn in 2013 up to £82.3bn in 2014.