Peeping Tom, looked at Godiva naked,
I feel like Peeping Tom watching Lady Godiva parade naked through the streets of Coventry. Everyone else is looking the other way , but I’m going to call out Pension Wise and ask just what the stronger nudge to Pension Wise will achieve.
Pension Wise has got no clothes on.
By which I mean, that attractive as Pension Wise is to those who pass the time in a guidance meeting , the visit is a spectacle, the meeting leads to awareness but once the meeting is over, what really has changed. Like knowing Lady Godiva is passing naked on her horse, we are bound to politely turn our gaze away. It was a lot simpler when people could talk to the Pension Advisory Service where there was no pretention. People want to be told what to do and told the consequences of not doing it. What they get from Pension Wise is the sizzle- not the sausage.
I can put my Pension Wise guidance meeting in some context. I went imagining what it would be like to not know the answers. The answers Pension Wise gave me were precisely right and confirmed what I knew, that I would have to manage my own affairs or pay for someone else to do this. I was nudged to nowhere. In the weeks after this meeting, I blogged about how satisfactory it was, but in the five years since, I have not found any part of the meeting informing my decisions.
I went for an initial consultation with the dentist which, like one with Pension Wise, lasted 45 minutes. At the end of the consultation I was told that I should return to the surgery twice in December for a course of treatment which would prevent my teeth falling out. This was indeed a strong nudge.
My dentist quickly diagnosed my problem and had the tools at hand to give me next steps. When I apologized for the state of my teeth, she replied “well you’re here now and now we will do the best we can”.
I wonder how many people who are calling for Pension Wise appointments to be mandatory, know the massive concern people have for their retirement and how much they crave the reassurance my dentist could give me.
My Ladybird-book version of the story had Tom shouting out “Lady Godiva’s naked”, for which Tom was put to death. His fellow citizens were outraged that he said what was so obviously unhelpful.
I apologize to my many readers who work for Pension Wise, this is no criticism of you , or what you do, this is a blog about you not having the tools – my dentist has!
I hope I don’t get a call later this week from with a summons to Stratford!
The FCA’s panacea – is a nudge to nowhere
Yesterday’s policy statement from the FCA (PS21/21) makes it clear what is going to happen.
From 1 June 2022 pensions providers must give consumers a stronger nudge to Pension Wise guidance when they decide to access their pension savings. Providers will be required to refer customers to Pension Wise guidance and explain the nature and purpose of this guidance.
These changes implement a requirement set by Parliament and are designed to increase take-up of the Pension Wise service, which offers free and impartial guidance to consumers about the options for accessing their defined contribution (DC) pension savings.
No doubt more people will book in to a Pension Wise session, learn about their options and then expect some next steps. But Pension Wise has nothing to offer except arousal. It is pure woke. Being aware of options is not the same as exercising options, for awareness to result in a properly implemented retirement plan, Pension Wise will recommend (but not give) advice. Advice to take advice is still advice, but as it doesn’t in itself lead to a definitive course of action, it falls outside the regulatory perimeter – so technically this advice is guidance. Lady Godiva has no clothes on.
Pension Wise may also recommend you consider the investment pathways offered by your DC provider, if you do not want to pay for advice or cannot find an advisor who will take you on. Like dentists, most advisers are not prepared to do unlimited work pro-bono but unlike the NHS’ dentistry , there is no National Advice Service. The Government’s commitment to financial advice is limited – so are the investment pathways.
Unlike annuities, which have long been advertised as needing a “shop-around” service (the open-market option), investment pathways offered by your DC provider come with no warning that other pathways are available. MoneyHelper does now offer a price comparison site where you can see what a range of providers offer but this is – in my opinion – not fit for purpose. Investment pathways are designed to provide savers with the means to turn their pot into a retirement plan. But savers have no idea if the pathway is value for their money. Pension Wise may point to investment pathways, but until some infrastructure is created to make purchasing a place on these pathways, this nudge is to nowhere.
The shambles of decision making since 2015 is available for inspection by visiting the FCA’s Retirement Income Survey. We are in the process of modelling the decisions taken by savers in accessing their savings to find out where the different pathways offered by providers would have led people had they been available 10 or 15 years ago. We are grateful to providers who have shared fund information with us – to allow us to do this important work. What is clear is that many of the decisions people have taken since 2015, were they to be repeated, would mean that most people would never spend their pension , some people would run out of pension before they did and that a relatively small number of savers appear to be sticking to guidelines which would give them a reasonable chance of getting a wage for life (a pension). Sadly, the FCA figures may also include people who have transferred their pension pot(s) into scams; for them the pathway ends in desolation.
So we are left with the sight of Pension Wise, being paraded around as a solution but offering rather less than that. The pensions industry is loud in applauding it , but secretly they know it has no clothes. The little boy in me wants to shout out what I can see to be true, but I know that those pension wiser than I , will look disapprovingly in my direction.
Pension wise is offering a nudge to nowhere. Until we get properly organized pension options in place, (as is happening in Australia), Pension Wise is a lovely distraction.
Clearly the nudge is more significant in the adviser market where the nudge has become a push
Advisers do make a difference to those they touch but the overhead in both time and money has risen so much that experienced advisers are seeking employment elsewhere.
I see no effort to encourage long term advice. A one off sterile interview is forgotten within days. Clearly you get what you pay for
People generally don’t want to be told what they could do by Pension Wise; they want to know what they should do – ie advice. Like private medical treatment however, financial advice is unaffordable for most people. The solution, as Henry hints, is a national advice service – I have dubbed it a National Wealth Service, but the name is not important – perhaps based on the CAB network which is already delivering debt advice for MaPS.
Good morning Ian, I totally agree with the idea of a National Wealth Service, although in practice it would be exceptionally difficult to avoid overlapping the job of paid advisers. Would the industry still be prepared to pay a levy/contribution towards such a service when it MIGHT be seen to take away business from themselves? Would there need to be a limit to the type of advice offered? would it be just homespun financial planning, or would it be allowed to deal only with mainstream retail collective products, or would it encompass unregulated illiquid investments too? Would the public be able to seek compensation from the National Wealth Service? Where would the high volume of high calibre advisers be recruited from? To remind you I agree with the principle you raise, and just trying to start a debate about how it would work in practice?
Good evening Brian,
I don’t claim to have a complete ready-made solution at all; but some aspects are feasible in principle. Prior to initiation of the NHS in 1948 there were plenty of nay-sayers amid bitter opposition from the doctors: and yet private medical practitioners have thrived alongside. While there will always be a market for private financial advice for those with complex circumstances and who can afford it, the mass market does not necessarily require sophisticated advice. Quite basic financial knowledge (percentages, compound interest, etc) is lacking in a substantial part of the population. I do not see the NWS as being funded by a levy on the industry; rather from consolidated Govt revenue. The best thing is that this does not need to built from scratch. I predict that dissatisfaction with Pension Wise may become a key driver for change.
Ian