Plug in pensions for the not so pension-wise

When you buy a phone or a washing  or a new iron, in the product packaging are some instructions which usually come in several languages and are printed so small that even if you wanted to read them , you couldn’t. You look instead at the box and find out what you really need to know. Then you set the thing up and by a process of trial and error , you become acquainted with what you have bought. If there is a problem, you go back to the shop or return it online or you might even have a helpline provided by the manufacturer. That’s how we buy things.

But it’s not how we buy a pension. Not only is there no detailed instruction book, there’s no box. People get a statement of what their pots worth and typically put the pension on eBay, swapping the value of their lifetime purchase of units for a cash sum which then sits in their bank account waiting for spending.

The weird thing is that there is a helpline, a free one provided by the Government, but hardly anyone’s using it, despite people being nudged about its availability with greater and greater strength.

We learn from Just that

  less than  one in five (18%) of those who accessed a defined contribution (DC) pot in the last four years booked a Pension Wise appointment, figures from the Financial Conduct Authority (FCA) show.

Analysis of the FCA’s 2022 Financial Lives  found only one in ten (13%) had a telephone appointment, and just 5% had this face-to-face.

While the majority (88%) of those who used the service said it helped them decide the next course of action to take, two thirds (63%) of those accessing pensions said they did not use the service or were not aware of it.

Just one in five (20%) had accessed the Pension Wise website, a fall from the 2020 figure of 22%. There was also a small increase in overall appointments, from 15% in 2020.

This service , which has no cost-benefit analysis, is about as popular as the little white instruction book that comes with your iron. This mystifies pension experts

Just group communications director Stephen Lowe said:

“The majority of people know it exists but we’ve yet to see a take-off in terms of usage, especially of the one-on-one phone and face-to-face sessions with a trained specialist that are the most valuable parts of the service.”

He said it remains to be seen whether a government trial to boost take up of the service, which included ‘nudging’ members towards appointments, will be effective, adding vulnerable savers in particular should be able to access appointments.

Lowe added:

“The government keep rejecting proposals to test the impact of an automatic appointment pilot. But they and the FCA are pursuing no other meaningful activities to drive up Pension Wise usage. They’ve given up and are out of ideas as the data from the FCA illustrates. Should we conclude they appear content that pensions savers do not mitigate the risks they face?

“People often struggle with the complexity of pension decisions. We all have a duty to help consumers and it remains a scandal that many of those who can benefit most from a guidance session are not getting one.”

I can’t agree with Steve. I want a pension that is done for me, not one that I have to learn how to do for myself.  I want to outsource the pensions management, I don’t want to be my own CIO and I certainly don’t want to be in charge of making sure my money doesn’t run out before I do. As for tax, I want pay as I go fairness as standard, if I wanted to maximise the efficiency, I would pay an an adviser of make myself an expert. But that’s not what I want.

Above all, I don’t want choices I don’t feel up to making.

Pension Wise, is about the investment pathways open to me, it helped me understand the tax implications of those pathways and tried to explain risk and reward. It told me again and again of the risks of getting scammed. But having done the appointment, I remain baffled by how the fifty minutes we get from the Government , makes us fit to make a lifetime decision on pensions.

And the problem is that the people who take the nudge are the people who will be following the rules, know about risk and are aware about scams. The vulnerable people put their pensions on eBay where the best they can hope for is to cash out the plan and the worst, that their money ends up in a hole in the ground in Cape Verde.

It’s time for a rethink on how we spend our pots

We’re eight years into Pension Wise and freedom and choice in taking pensions. What we’ve learned from the FCA’s Retirement Income Survey and “Financial Lives” is that behavior is not changing and people aren’t turning pots to pensions.  Pension Wise is not making a difference, people are not talking it up, take up is going down not up.

That doesn’t people are getting smarter, it just tells us that Pension Wise is not catching on. That spells trouble.

What we haven’t yet seen is the angst that comes when the pots run out and people who thought they had a pension find they have nothing of the sort. That will lead to disillusionment which, if we aren’t careful, will cascade down through generations of savers.

We urgently need a default solution to the hardest nastiest problem in finance, a means of turning pots to pension where the risk and reward dials are turned to medium and the outcome is a wage for life with a degree of inflation protection coming as standard.

This is the “bought for us” plan that comes out of the box and only needs us to plug in to the socket.

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 Plug in pensions for the not so pension-wise

  1. Martin T says:

    Another distressing statistic in addition to low take up of Pension Wise appointments is the small proportion of annuity buyers who shop around, despite the easy access to tools to do so and the promotion of the open market option.

    MoneyHelper offer an independent, impartial pension helpline on 0800 011 3797 to all, which also gets high satisfaction scores from those who use it.

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