Let me explain why I think supporting small-time savers matters. It is not because I am a latter day Gladstone, wandering the streets of poverty looking to save lost souls from scammers, it’s because I’m disillusioned by the lack of progress we are making in dealing with the systemic injustices of our pension system which encourages the austerity of saving and does so very little to ensure those savings make for contented retirements. I speak specifically about those with little else on the personal balance sheet but their retirement savings.
The two faces of austerity
We’ve been through 18 months of enforced austerity. The list of things we haven’t spent money on far outweighs the extra costs of the pandemic and that means that most of Britain’s mass affluent are better off. The cost of servicing debt is negligible, world markets are at record levels , it is hard to find a sector that hasn’t performed – other than cash. Our properties increase in value We’re alright Jack.
But , if you’re reading this blog, you are unlikely to be worrying about losing your £20 UC top-up, or fearing an increase in your fuel payments , and you probably aren’t spending hours queuing for petrol because your livelihood is tied to your van.
For those who have very little , managing what little money comes in , means meeting bills on time. The one exception to this rule is the money that comes out of the pay packet to pay the workplace pension and the national insurance credits for those with no wage, that builds rights to the state pension. For those for whom austerity is BAU – the pandemic just added to their chronic financial lockdown and amazingly , the vast majority of the poorest savers , kept saving.
Which is why workplace pensions are so very important to those without accessible savings, houses and job security. Those whose liabilities regularly exceed their income have the dignity of knowing their is money building up which is not allocated to meeting a bill or the cost of Christmas or to a new exhaust on the van. Pension money is free money, money that can be spent on not going to work, not relying on Universal Credit.
For the poorest in our society, pension saving is an incredible sacrifice and people save month after month, year after year, amounts that wouldn’t add up to a single bonus sacrifice to someone like me. But that saving is often made harder by ridiculous rules that mean low earners have to overpay their pensions by 25% because they don’t get the savings incentives they’ve been promised. And many low earners will be finding themselves paying unnecessary national insurance on earnings that get paid into pensions because they don’t get salary sacrificed for the purpose. And when they get to retirement, these people get hit with outrageous cuts in benefits if they don’t draw their money in the best way.
Who is looking after the retirement interests of the poor? Well I’m looking at the Government’s Money Helper website and in particular the help that we are supposed to be getting on how to spend our savings.
The first thing I notice is that the video isn’t work and the second thing I notice is that the site is advertising “in person” meetings, which Pension Wise haven’t been offering since March 2020. The third thing I notice is that Pension Wise is keen to tell me what it won’t do, and is only promising information on how I can get at the money in my pension pot. But that’s interesting to me so I want to know what the video transcript has to tell me.
“Pension Wise is a government-backed service that provides free, impartial guidance to help you understand your options for your pensions savings.”
Who is Pension Wise for?
“You’re eligible for a free Pension Wise appointment if you’re 50 or over, and have defined contribution pension, which is where you build up a ‘pot’ of savings that you can access when you reach retirement. This would include many private and workplace pensions.”
What does an appointment entail?
“An appointment lasts approximately 45 minutes, and in that time, we’ll explain the different options you have for accessing your pension pot, taking into account your particular circumstances. We’ll also cover how to shop around for the best deal, how to avoid scams, as well as answer any questions you may have.”
How to arrange an appointment
“You can have your appointment either over the phone, or face-to-face in one of hundreds of locations across the UK.
“Call for your free Pension Wise appointment, or for more information go to pensionwise.gov.uk”
Apart from repeating the lie that you can have a face to face appointment (in 100s of locations) , this introduction is not getting to the point.
The point is that Pension Wise is only dealing with your “defined contribution pot”. It is not dealing with your benefits, or your state pension or indeed your worry that you have more than one “pot” and want to know whether and how to combine them. It is simply dealing with your “options” – which is the posh word for “choices”.
So this agenda is not very appealing to someone whose concerns are about losing benefits (which people know happens), or about getting promised savings incentives or about making sure of your state pension . It is just about my “defined contribution savings pot”
An appointment is a 45 to 60 minute conversation with a pensions specialist.
We’ll talk through your options for taking your personal or workplace pension money. We’ll also explain tax and give you next steps to take.
You’ll also get a written summary of your appointment.
I am not excited and despite this service running for six years, neither are many others. These are the figures for take up.
MaPS claims 14% take up and this seems to assume that over a 7 year cycle the 2% average annual appointment rate gets that level of “pot coverage”. But that is well away from being the “norm”.
Ros Altmann bemoans this in an article published in Money Marketing this week.
This service is at the frontline of consumer protection, allowing people heading towards retirement to make informed choices and avoid the attention of scammers.
The government always intended that this free, impartial service would be used by all pension savers before taking money from their pensions.
Pension Wise performs extremely well in all areas except one – it has too few users.
I would dispute that Pension Wise is at the front line of consumer protection. Those who use it , say nice things about it, but those who use it – will. For people who want to spend 45- 60 minutes on the phone discussing pension freedoms, Pension Wise performs well.
The problem is that the people who use it are the kind of conscientious information gatherers that soak up free information and store their written summary in their pension files.
But this bedrock of Pension Wise users is not growing and is certainly not representing the “norm”. The “norm” are going elsewhere for their information.
Ros may not like the thought of that but she shouldn’t be questioning the behavior of the public (who have plenty of exposure to Pension Wise publicity). Instead, she should be asking why normal behavior is to ignore Pension Wise.
The answer to that question is that the product itself is insufficiently interesting to people who want more than 45 minutes of largely scripted conversation about how to take their “defined contribution pension pot”. They don’t want generic guidance, they want clear information about what they have and the choices they can take – and their implications.
Most people don’t make telephone calls , they talk through digital devices using the web. Most people expect to have the information they need presented to them by the web in real time. People know how to diagnose medical conditions, switch utility suppliers and order a hamburger to their door, using their devices. In a world where there is an app for everything, Pension Wise is not on the front line – it’s not even on the sideline.