As a financial adviser, clasping my clipboard on Oxford Street in the early 1980s, the idea that people would be queuing for pensions advice would have seemed improbable. My job was to stop shoppers, ask them if they were interested in a free meeting at their home to discuss pensions and to take a name and number. Occasionally – very occasionally, someone would start their savings journey with me.
Now – 35 years later – those shoppers are reaching retirement and asking “where’s my money, how’ve I done and what can I do now?”. While they may not be reaching retirement with the “huge capital reservoir” my sales script promised them, they know that their savings are a way out of a lifetime’s work (or a chance to do more shopping).
Yesterday, the FT’s headline on the Government’s Pension Guidance service for the over 50s read
Waiting times for appointments with the guidance service Pension Wise have lengthened as a result of rising demand for its free sessions on pension options, prompting calls for more government support.
People aged 50 or older who have a “defined contribution” pension are entitled to a free 45-60 minute face-to-face or telephone session with a specialist who will talk them through options for accessing their pension savings.
The service was introduced in 2015 to help people better understand their options after major reforms gave over-55s the freedom to spend their pension savings as they wished, without the requirement to buy an annuity, or income stream, with their pot.
An official evaluation of the service published on Monday found that nine out 10 people surveyed who had an appointment with Pension Wise were very satisfied with the service, where customers are given a full explanation of the six options available for accessing a defined contribution pension under the pension freedoms.
According to the report, those who had a Pension Wise appointment were significantly more likely to take further action, such as calculating their retirement income or speaking to a financial or tax adviser, compared with those who had not used the service.
In the 2017-18 financial year, the Pension Wise website received over 2m visits. More than 63,000 face-to-face appointments and over 24,000 telephone appointments were arranged — both around a third higher than in the previous year.
The report found customers experienced longer waiting times for appointments, including some having to travel further for a face-to-face appointment, after the service was streamlined by the government.
It is not just Pension Wise that is seeing an increase in usage. Here are the numbers from the Pension Advisory Services 2017 report and accounts
The small print beneath the graph
While we can be proud to have Pensions Wise , TPAS and from January the single guidance body, we cannot expect the public sector to shoulder the private sector’s burden.
I feel responsibility for the pension saving schemes I have set up since I started in the eighties and it saddens me when I read that those savers still don’t want financial advice today. This report suggests that the vast majority of us see advice as a rich person’s plaything.
If you go to the Government’s own evaluation of Pension Wise it suggests that the ordinary people who reject financial advice are being referred by the private sector to Pensions Wise
Ironically, those who paid so heavily for the financial advice I sold them in the eighties, are now being referred to Pensions Wise because they cannot afford to pay again. There is an interesting moral issue here for some insurers whose direct sales forces charged for lifelong advice within the products.
The small print under TPAS graph “we believe that many more people can benefit from pension guidance” is echoed in more forcible terms by the FCA – who are quoted in Pensions Expert..
The FCA highlighted that while Pension Wise is available to provide fee and impartial guidance to consumers, “take-up remains low”, noting that in the third quarter of 2016 a total of 143,752 consumers accessed their pensions but just 13,990 had a Pension Wise appointment.
The private sector needs to step up to the plate
There seems an obvious business opportunity for the private sector here. If less than 10% of those accessing a pension pot are using Pension Wise and (as the FCA tell us) 94% of people don’t take advice, it seems likely that the majority of people are getting to their forties and fifties with no real help on how to spend their pension savings.
The great Government success story in this space is not so much Pensions Wise but TPAS, which delivers the goods at £36 per capita against the Pension Wise cost of £120. TPAS helped 175,000 people last year but it is being (sub) merged into the Single Guidance Body in January. TPAS’ CEO will go and with it – I fear – much of the energy and skill that TPAS has brought us.
I feel like Theresa May after the 2017 election “I got us into this mess, I’ll get us out of it“. Whatever you may think of the Brexit plan, you cannot fault May for sticking to her word.
I got many of my clients into a pension pot and I’m determined to get their money our of it!