“Pension Wise could make us better buyers” – more conversation with Ros Altmann.

 

For the second time in a week, this blog is based on a long comment on my blog from Ros Altmann. Ros is again defending Pension Wise, arguing that it is an under-rated service that needs better promotion (a stronger nudge).

Despite having 94% approval ratings, Pension Wise is only used by 14% of its target audience. In my view, the answer is not just a stronger nudge, but a more targeted service.  I argue that Pension Wise  should be teaching people how to buy, focussing on how they can get value for the money they’ve saved

In this conversation , Ros is in black, I am in blue.  


The conversation

I agree with you about the MaPS comparison tool and also any investment pathways, this is not what the public need – they need individual help to understand their own decisions.

“Understanding our decisions” is interesting. I often look back and ask why I took such and such a course of action and can’t explain it. Most of us are bad buyers of financial services, we need help in taking decisions.

One of the things the MaPS comparison tool can do is to provide a record of decisions taken.  This can best be done best with a combination of digital and human input, the FCA recognise this in their “sales guidance model”.

Pension Wise would be much improved if it had an automated distribution channel, which linked the member to human support as they went through the decision making. The record of the decision would be created by the saver as they decided how their savings would be spent.

I would link Pension Wise to an improved version of the Investment Pathways choice tool and get people to be guided through it by Pension Wise. This would bring the decision making to life, and create a guided sales process that led to a decision being taken , understood and recorded.

The record of the decision is useful not just at the time, but in future years. It is the way to understand the decisions we have taken,

Just comparing fees or ‘risk’ ratings of products or ESG will not necessarily help with the most important issues that individuals face regarding their pensions.

I agree with this too, fees and ESG are considerations in the process, but the main event is the payment of the savings back to the saver or his/her estate (what IFAs call the cash flow model) . Other important considerations are interactions with state benefits, especially pension credit and housing benefit.

Making smart decisions on how to draw your savings often needs personal guidance beyond the “power of an hour” – referrals to TPAS and Citizens Advice as well as Government websites should form part of the guidance. 

However, please don’t tar the rest of MaPS – which shows worrying signs of inadequacy – with the brilliant people working at PEnsionWise and the TPAS staff.

Ok, I won’t. People are great individually; the problems at MaPS aren’t the people, who I know read this blog and comment on it.  The problems are with the dumbing down of the “brilliance” by a system designed to de-risk everything to a bland mediocrity. When people are part of a process as dull as  Pension Wise , I may become desensitised to their  brilliance! If I have insulted Pension Wise staff, it was unintentional.

The rigorous training with PensionWise insists upon is something the industry could be proud of, the attention to detail and care with which the public are treated by guiders is very different from the ‘one-size-fits-all’ approach taken by MaPS and other public information services.  If you were to see the diligence, performance standards, ongoing measurement and quality checks, I don’t think you would have the same opinions as would be perhaps more readily relevant to other parts of MaPS.

OK, this feels like a good challenge. I have long stood up for TPAS. I was saddened when it was merged with MAS and protested when I saw that its bright star, Michelle Cracknell , had not been given the job of CEO. Pension Wise has become a victim of “diligence, performance standards, ongoing measurement and quality checks”. 

TPAS helplines and PensionWise do actually help people on a one to one basis.  People have a chance of individual guidance and someone who is properly trained to understand the complexities and other issues that pensions involve.

I agree, and  TPAS has always offered a  valuable service  . The MoneyHelper pension guidance is free at the point of use (like the NHS) and covers much more than people’s investment pathways (which is the little bit Pension Wise covers).

This begs the question, why do we not make more of the broader guidance available?

But this national treasure is not Pension Wise. Pension Wise is just about investment pathways.

And Pension Wise is not for everyone, many people need help with pensions but don’t qualify for guidance from Pension Wise (having the wrong kind of pension)

If you only have DB or state pension benefits, Pension Wise is not available.

I am sorry to say this again, but a pension provider’s helpline does not do this.

I don’t agree! This is exactly what pension providers train their staff to do. They only give guidance on a narrow range of options, they stick to scripts and processes , just like Pension Wise. Right now Pension Wise is duplicating much of what is being said on provider helplines. Pension Wise is struggling for a purpose that isn’t met elsewhere.

The training for call operatives is not of a consistent standard that would ensure they could tell customers, for example, about types of product which their own firm does not offer.

This may be the case (I don’t know). From my experience dealing with call operatives, the success of the call is down to the questions I ask. Pension Wise can help us to ask the right questions and so become better buyers.

If people  thought that Pension Wise would make them better buyers, give them better value for money – as they do when they watch Martin Lewis, it would be serving a purpose that would get it better used.

Pension Wise cannot tell people about the products that people have. But it can explain how pension products work and how to use them.

People need help on  how funds work and tips on tax, avoiding exit penalties, not missing out on benefits . Much of this comes out of conversation which again is why I think an interaction with the investment pathway tool would be really helpful.

IMO, Pension Wise , could be using the investment pathway tool to get people to ask the right questions of their providers – to become better buyers – to get better value for money going forwards

Or the advantages of not withdrawing money too soon.  Many pension customers have taken money out of their pension just because they reach age 55 and then gone into drawdown, meaning they pay higher fees on money that is just reinvested for them at higher cost than it would have paid in their pension fund.

Here we have a whole load of “design issues” which are way beyond Pension Wise. You are pointing to the systemic problems with minimum retirement ages. There are many other pitfalls that beset people in their fifties who don’t know their way round pensions,

How does someone who is in an occupational pension scheme get help with drawdown from that scheme?

How do you consolidate your pension pots to get best value? 

What happens when someone in a legacy 226 pension wants to drawdown? How do you deal with GARs and protected tax free cash?

What about AVCs? What about with-profits?

These kinds of questions can be answered by TPAS, not by Pensions Wise – people should be referred to TPAS by Pensions Wise, rather like a GP referring a patient to a consultant. We may see more organisations like Guiide and AgeWage providing independent guidance but TPAS is always there.

Pension Wise is infact a very niche service for a relatively small issue in people’s retirement affairs. TPAS is the umbrella advisory service, but it gets very little promotion. This is because Pension Wise has all the budget (being a special purpose project for the non-advised with personal pensions).

A big issue is the lifestyle arrangements which may even mean customers having paid to switch out of higher return assets, lost money for the past year or so in supposedly safe fixed income and then go back into higher return assets at higher levels then they were sold and with higher ongoing fees.  These are matters which individuals need individual and independent help with – either from an impartial guidance source or from an independent financial adviser.

I totally agree with you that lifestyle is leaving many people high and dry in the wrong assets at the wrong time. People who are retiring from workplace defaults should be getting guidance from their providers about how to avoid wasting a lot of value. Once again, people need to know what to look out for, how to “buy better”.

I am not trying to have any kind of ‘battle’ with you Henry, I just want to help people understand that the customer is in serious danger if they are left only with paid-for ‘guidance’ that has no advice attached, no responsibility for errors and well-meaning products that are meant to fit ‘most’ people, but may not fit them at all.

I agree that people would do well to speak with Pension Wise before taking decisions but Pension Wise has got to be sharper about its messaging

I find it hard to engage with the Pension Wise service based on these bullets.

The providers have an obligation to signpost Pension Wise but often they only pay lip-service to it . Signposting Pension Wise may seem worthwhile from a distance, but most people are keen to get on with whatever they are looking to do – and providers keen to get on with it too!

Providers , like  their customers, find it hard to see what Pension Wise is adding.

I don’t think that commercial call-operatives are deliberately fitting people up, anymore than lifestyle is. People are doing stupid things with their retirement savings, (as can be seen by studying the FCA’s Retirement Income Survey). This is because they aren’t being given the right questions to ask.

Pension Wise could be repurposed and sold as a place to understand how to buy pensions. Right now the messaging is all wrong.

And let’s not forget that the guidance we get from providers is itself a valuable service which is paid for (not free),

Guidance is priced into the retirement savings products we purchase. So people have paid for guidance  by the time they get to retiring from DC products. They may have paid commissions which were supposed to pay for advice (which disappeared when the sale was made), they certainly paid for a contact centre from the provider to deal with claims, switches and queries about valuations.


Having the whole industry pay for the impartial PensionWise guidance is, in my view, (and it seems you disagree) the fairest and most efficient way to offer such help because it spreads the costs among those providers and advisers who cover every type of product and who do not have a vested interest in their own business, which must necessarily mean that those who do not offer all options will not be impartial.

I am not concerned whether Pension Wise is funded out of an industry levy or general taxation – so long as it is effective and gives value for money. 

You are placing too high a premium on independence. Pension Wise cannot leverage its independence because it always has to signpost a paid service which is not independent. IFAs are mostly vertically integrated, meaning they recommend in-house solutions while product providers almost have to do the same (other than with annuities – where there is a strong open-market paid for by commissions).

What I want to see is a reformed Pension Wise that takes people through an investment pathway comparison site based on value for money metrics. This should be possible today, were the comparison site fit for purpose.

In future , I want Pension Wise to be explaining how to choose a good pension option, how to determine where value for money is to be found and how to find it. I want something much more Australian where the Government is prepared to call-out poor solutions – whether for high charges, poorly managed investments or for rubbish service.

This would mean being part of a larger consumer orientated Government-funded program providing league tables, VFM scoring and robust comparisons between different arrangements even where there was an element of apples v pears.

I want to see Pension Wise as a robust source of information on which people can make decisions about to whom we should commit our retirement savings as well as what investment strategy to pursue. This may seem ambitious , but it happens in other countries,  most notably Australia.


I hope that we can respectfully disagree, without you turning this into some kind of dispute.  I am sure you also mean well Henry, but the world is not full of actuaries and poeple who do not understand pensions can still do so with appropriate explanations, which would be very much in their better interest, than continuing to be told that they can’t understand it all and should leave it to the industry to put them into a product that will be ‘ok’, regardless of their other needs.

I think you are referring here to my predilection for default solutions ! I know we disagree with each other on this – especially when the default solution is collective and involves individuals saying “here’s my money – give me your best shot!” (CDC).

I know there are many who think that the proposed collective decumulation solutions are a cop-out. But for many people who have delegated all pension decisions to their employers providers and advisers, a fall-back solution is essential. As Terry Pullinger puts it “some people want freedom from freedoms”.

People can understand the state pension and they understand the formula for their defined benefit pension scheme, because both give them a pension.

What people can’t understand is how a pot of money which was supposed to be a pension , now needs a visit to Pension Wise and another to the investment pathways comparison site to work out the right product with relation to their other needs.

Less than 6,000 people have used the comparison site in its first year, less than 1% of the people who started drawing their pension last year. 

If we cannot get people to follow the suggested user journey, then default products such as CDC pensions are less harmful than buying in the dark.

They need, in my view, to understand pensions, not be told this is all too hard and they just shouldn’t bother to try – just phone their provider helpline and trust this will work for them for the rest of their life.

Here we are back in step Ros. I do think that people should be empowered to think for themselves and Pension Wise could give them the confidence to do that.

But most people understand pensions as an amount of money that is paid to them for the rest of their lives. That’s what they get from the state pension , defined benefits, even annuities.

All the complexities about tax, benefits, investment platforms, longevity risk , ESG, charges and value for money are making a lot of people give up and either cash-out, strip out tax-free cash or just leave the money in the pot.

People need to be back in control of their money, Pension Wise could serve that function, but it will need to step up to the plate and become part of a sales guidance model that helps people make smart decisions

Do please look into the training and standards that PensionWise operate and also the TPAS people, this is a quality service within the limits and bounds of possibility which more people could really benefit from.

I agree with you about quality training, both at TPAS and Pension Wise, but that doesn’t seem to be increasing take-up which is stuck in the low teens. What is needed is training in the Guidance Sales Model, so that Pension Wise gets action,

Hope you can help find ways to encourage more take-up and constructive engagement.  I have no vested interest in any of this Henry, I just want to help people with their pensions, because they are such a brilliant product.  Wish you all the best

Thanks Ros, same to you!   I wish you did have a vested interest in this, you and I could put a new lick a paint on what looks like a pretty tired service!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to “Pension Wise could make us better buyers” – more conversation with Ros Altmann.

  1. John Mather says:

    What is rather sad about this conversation is that both are passionate about the provision of pensions. Surely this intelligence can be better employed finding a solution that does work.

    Having identified the need for explanation and understanding surely it is clear that Guidance is not enough to be effective. You need advice and advice that is bespoke. Advice is required at an earlier age than those currently seeking guidance. The current “solution” Is just too little too late.

    The advisers have been reduced to box tickers too frightened of fines for giving unique advice appropriate for the individual but outside the compliant “reasons why not” letter that no one reads

    The reality is that nothing happens until someone sells the idea of differed gratification v poverty beyond work

    Surely if the investment were in advice and stop hiding from responsibility behind the Guidance label. Make sure the advice is followed by action

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