Just over six months into the freedom and choice regime, mutterings about the success or otherwise of Pension Wise are getting louder. Evidence to the Work and Pensions select committee has suggested take-up of the Government’s independent guidance service could be as low as one in 10 of those accessing their pension pots.
Pensions minister Ros Altmann recently suggested low take-up was due to providers not signposting the service adequately. But might there be other reasons?
After all, 90 per cent of those using Pension Wise are satisfied with the experience and, while some providers might be able to do more, most promote the guidance service extensively in their communications to customers. Our experience of customers wishing to access their pension pots suggests human nature is presenting a bigger barrier to speaking to Pension Wise.
Many of the customers who come to us wanting to exercise pension freedom are members of company plans wanting access to cash. Around half of them are five or more years from their stated retirement date.
A third have pension pots of less than £10,000. What many of them do have, though, is simplicity of need and a certainty of intent. Both of these will tend to prevent people seeking expert help and guidance and must, at least partly, explain why Pension Wise take-up has been so low.
By simplicity of need, I mean that customers see accessing cash from their pensions as a relatively simple request, particularly if the amount is small or they are only taking part of their savings. If I want to get my tax-free cash five years early so I can buy a kitchen why should I not do that? Why do I need to have a retirement planning conversation for something so straightforward? Allied to this is the certainty of intent. I know this is what I want to do, I am not up for discussing options and, in many cases, I certainly do not want to be told I should not do it.
Where do customers get these notions? Well, a large part of it has to be around the political language used. Customers have been told it is their money to do with what they want; that they should be trusted with their money and that they can use their pensions as bank accounts. Against this backdrop, is it surprising customers do not want to engage in a guidance conversation?
Much of the messaging from the Government has been about what people can do. There has not been much about what people should do. Even the Pension Wise TV advert stops short of telling people they should use the service before accessing their pension funds.
Pension freedom is great. But everyone has to be more outspoken in promoting the need for people to get expert help – be that from Pension Wise, advisers or providers – if we are to make it an even greater success.
Richard Parkin is head of retirement at Fidelity International