Not providing the basis for a well-informed choice could lead to the next major pensions mis-selling scandal, a report published today (19 October) by the Work and Pensions select committee said.
The committee said pension freedom is not yet operating entirely as it should, and that evidence to the committee shows the advice and product markets are responding to fill gaps, but lack of regulatory clarity is endangering pension savers.
Altogether, improvements in guidance and advice were deemed by the committee to be crucial to the success of the pension freedoms policy and MPs stated they will monitor progress more closely.
The Work and Pensions committee stated the apparent take-up of Pension Wise has been less than many anticipated, and the committee recommended stronger signposting to the Pension Wise service by pension providers.
Additionally, the MPs ruled that Pension Wise should give more personalised guidance incorporating an enquirer’s wider financial circumstances and improve its ‘static; website to incorporate interactive features like, at least, an income calculator.
Frank Field MP, chair of the committee, said: “Reluctance to provide information about how a reform or service is working is rarely a good sign.
“It is very difficult for the government to support its claims that all is well, or for us to make any assessment of progress, when no data is forthcoming despite repeated requests.
“These reforms have been in operation for six months now: it is evident that has been long enough for the scammers to get going, working on defrauding people out of their life savings - it should be long enough for government to have published some data about how the reforms and the attendant guidance and advice are working.
“Good quality, co-ordinated and accessible guidance and advice will be the best tools to ensure people make the best, informed decisions about their retirement savings, and protect them from scammers.
“The government must urgently provide some data about how this is all working, and close the gaps that are already apparent.
“We have seen all too clearly, too many times, what happens when financial information is not properly provided and regulated. We literally cannot afford another financial mis-selling scandal.”
The committee’s comments came after last week at the National Association of Pension Funds annual conference, a Pension Wise director revealed plans to revamp the guidance sessions.
When asked where do we go next with guidance, Jamey Johnson, deputy director of Pension Wise, said it was quite a “restrictive session” that had been built for the launch of pension freedoms back in April.
He said it was now quite clear that the “one size fits all approach” to guidance that was initially offered through Pension Wise “does not suit everybody.”
Reflecting on the contents of the select committee’s report, Richard Graham, member of the committee and chair of the All-Party Pensions Group, said: “The committee supports pension freedom reforms and the evidence we heard was broadly positive so far about the provision of guidance, although we do question whether enough is being done by both government and contractors to publicise its availability.
“We do also believe the government, directly or indirectly, would want to commission in-depth research tracking consumer outcomes over time.
“People may be happy now with their decisions - and express satisfaction with Pension Wise services - but how they feel many years down the line is arguably more important.
“In this brave new world of pension freedom information is key to ensuring the reforms are successfully implemented.”
An HM Treasury spokesperson said: “The government has been absolutely clear that any attempt to exploit people who have worked hard and saved for their retirement is unacceptable, which is why we are working with police, regulators and other bodies to raise awareness and take action to protect consumers.
”We have also legislated to place a duty on the Financial Conduct Authority to require pension providers to signpost individuals to our guidance service Pension Wise and encourage people to use it.
“Six months since its launch, Pension Wise has been a real success story, with 1.5m visits to the website and over 20,000 guidance appointments – we’ve already committed to making this data available on a regular basis. We’re continuing to build on this success, promoting the service through a national marketing campaign and our local guiders, and considering ways to make Pension Wise even more useful for consumers.
“We will respond further to the Committee’s report in due course.”
ruth.gillbe@ft.com
