View more on these topics

Ros Altmann: Guidance is not good enough in new pensions landscape

Ros AltmannWith 10 million workers newly saving into pensions as a result of auto-enrolment, there is a tremendous opportunity to help more people plan for a richer retirement. However, without improvements in engagement with pensions and investments, this opportunity may be wasted. Indeed, the key to maximising that potential may well lie with financial advisers.

The level of pensions knowledge across the population is astonishingly low. To be fair, in the past, the industry created an environment where customers had most big decisions made for them.

Since 2016, radical pension reforms have replaced that era of one-size-fits-all approaches with new pension freedoms, giving more choice and flexibility about how and when pension savings are used. This could be brilliant for customers, but those approaching decumulation need urgent help – and advice. Without better-informed customers, the freedoms might be used inappropriately. In fairness, alongside the new rules, the government intended to introduce a system of free financial guidance for all customers before they made final decisions about their pensions. The chancellor announced there would be free financial “advice”, but the Treasury corrected the term, clarifying this was only guidance.

Of course, guidance can help people understand the important questions they need to consider, but it will not give them the answers that are right for their own specific circumstances. Only qualified independent financial advisers are likely to do that. Pension Wise guidance was originally expected to encourage more people to use financial advisers, once they realised the complexity of pension options. Unfortunately, this has not really materialised.

The public’s pension knowledge remains inadequate, even after using Pension Wise. But despite this, DWP analysis found 97 per cent of customers felt their understanding of pensions had improved. The research suggests Pension Wise has helped people find out more about taking money out of their pensions, rather than why they would want to leave their money in. Indeed, for many people, the tax advantages and penalties involved will mean withdrawing funds could be a costly and irreversible mistake.

When I was pensions minister, we introduced the £500 advice allowance, so that customers could pay for financial advice out of their pension savings, but take-up of this has been extremely low. More employers and providers should encourage their members to use this.

Guidance is just not enough to ensure people make the best use of their pension savings. It is only a first step. Independent, expert financial advice can stop people withdrawing funds when they do not really need to and even encourage them to invest more for longer.

Ros Altmann is former pensions minister



State pension court showdown set for summer

A judicial review about changes to the state pension age for millions of women born in the 1950s will take place from 5 to 6 June. The Department for Work and Pensions has confirmed that last November’s decision by the High Court to grant permission for a judicial review will go ahead in the summer. […]


UFPLS vs flexi-access drawdown: drawdown wins by a country mile

If there is a straight choice between flexi-access pension drawdown and uncrystallised funds pension lump sum, flexi-access wins by a country mile in virtually every situation. The Treasury prefers to pronounce UFPLS as “uffplus”, presumably because the plus syllable lends a positive quality to this otherwise ridiculous expression. Most pension professionals prefer to pronounce it […]


Pension withdrawals hit £25.6bn since freedoms began

More than £25bn has been withdrawn since the pension freedoms started in April 2015 according to the latest statistics issued by HM Revenue and Customs. In total 284,000 people withdrew over £2bn from their pensions during the first quarter of 2019. Average pension freedoms withdrawals per person were £7,254 in Q1 2019, a slight decrease […]

Europe: Volatile share prices create opportunities for long-term investors

Mark Page and Laurent Millet, managers of the Artemis European Opportunities Fund, look at why, how and where fluctuations in European markets can generate opportunities for their fund. When asked what the stock market would do next, John Pierpont Morgan is reported to have replied that “it will fluctuate”. His (apocryphal) answer proved accurate. Over […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. Richard Leeson 2nd May 2019 at 5:08 pm

    Sadly £500 buys next to nothing from an adviser and that is IF you can find one prepared to charge flat fees not %.

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