Royal London’s 2014 results were dominated by criticism of the speed in which the new pension reforms are being rushed in, warning that its own data showed less than 2 per cent look likely to take up the new ‘guidance guarantee’.
In the results published today (12 February), group chief executive Phil Loney said that while they are fully supportive of the policy objective of new reforms, set to come in from April, “customers are not ready for the new pension freedoms, which have been thrown into place in an entirely unrealistic timescale”.
He said: “I fear that many will make the wrong, often irrecoverable decisions about their retirement and this will result in some very poor outcomes. The simple fact is that many people, perhaps most, have not engaged with pension freedom and lack the basic financial knowledge to take the next steps.”
Mr Loney explained that for the last three months of 2014, Royal London had included reference in its wake up packs to the services offered by The Pensions Advisory Service.
Of those customers without an adviser, he said “surprisingly few” took up the offer to speak with the Tpas experts.
Of the 3,600 letters sent out in the final quarter of 2014, only 71 customers made contact with Tpas: a response rate of less than 2 per cent.
Given the importance of getting sound guidance at retirement, Mr Loney said he was working with the Pension Wise team on different signposting techniques that could be more effective at getting non-advised customers to take advantage of the new pensions guidance service.
“I remain to be convinced that a new leaflet with a new logo, and a publicity campaign will dramatically improve response rates anytime soon. Meanwhile Citizens Advice report that they will only have a very limited capacity for face-to-face guidance in place for April.
“The FCA has recently introduced the requirement for pension providers to ask additional questions about personal circumstances and issue risk warnings about the adverse consequences of some decisions; we believe that this belated intervention will not solve the problem. “
He added that a “high priority” on the “to do” list of the next chancellor and pensions minister must be to address the advice vacuum for middle market savers, with clear direction given to the Financial Conduct Authority to make rapid and substantial progress.
“Without appropriate impartial regulated advice there is a very clear risk that many over 55s will make inappropriate decisions which land them with an unnecessary tax liability and an inadequate income to live on.
“George Osborne’s pension reforms have the potential to become famous for helping people to improve their retirement incomes but without plentiful and affordable financial advice they risk becoming an infamous example of political bungling.”
Meanwhile the new business results for last year showed that continuing new life and pensions business sales were up 39 per cent on 2013 at £4,826m.
They revealed group pension new business was up 83 per cent to £2.2bn, while individual pensions hit £1.38bn - up 25 per cent on a year ago - drawdown was at £781m - up 43 per cent - but protection sold through intermediaries was down 23 per cent - to £338m.
Total group funds under management were £82.3bn as at 31 December 2014, an increase of 12 per cent on 31 December 2013.
emma.hughes@ft.com
