Current pensions minister Ros Altmann’s ‘Workie’ auto-enrolment advertising campaign is “completely the wrong way round” and the money devoted to Pension Wise could have been better spent on an adviser voucher system, according to her predecessor Steve Webb.
Speaking at the ‘Squeezed Savers Symposium’ organised by Engage Insight yesterday (5 November) in London, the former pensions minister took a swipe at the recently-launched workplace pension awareness campaign, stating “it’s got the behavioural angle completely the wrong way round” in comparison to the ‘We’re All In’ slogan used during his tenure.
He added that he hoped there would be an evolution of the ‘Don’t Ignore It’ message so that the Workie character gets noticed in future adverts.
Mr Webb also pointed out that the free guidance service brought in to assist retirees with the new freedoms open to them from 6 April “has not got the coverage we would have hoped” and in hindsight he wondered whether the money should have instead been spent on some form of “cheap advice” via a voucher system enabling consumers to see an actual IFA.
“I hoped it would have been a little like wine tasting, you have a sip of guidance and then decide to buy a case, or regulated advice. This hasn’t happened though and most are put off with advice still being too expensive.”
With this in mind, Mr Webb welcomed the Financial Advice Market Review, which he said must lead to de-regulation and the harnessing of technology to bring the cost down and get people to realise the value of advice.
Turning his attentions to the other major consultation to come from this Summer’s Budget, he set out the case against the so-called ‘Pension-Isa’ proposal contained within the Green Paper on pension tax relief.
The first flaw identified was that while the freedom and choice reforms maintain a tax barrier to people cashing in their whole pot at retirement, this would be removed under the P-Isa, effectively “taking the breaks off buying that Lamborghini”.
Secondly, with a rapidly ageing population, the unfunded costs of care and state pension for a growing number of non-tax-paying pensioners will fall on a rapidly dwindling amount of younger tax payers.
Mr Webb continued that with auto-enrolment on the way to putting £10m people into exempt-exempt-tax pensions, what would happen under a tax-exempt-exempt system?
“Do you have two pension systems, do they all move across – the consequences are just horrific – and I think the chancellor has been quite taken a-back by the reaction to the proposal.”
In line with his suggestions around promoting better employer/employee matching in workplace pensions, Mr Webb said that the right answer is to make tax relief matching too, with the employee, employer and government all paying in at a flat rate of either 33 or 25 per cent.
“This simplifies things and hopefully prevents future chancellors from fiddling around with tax relief once and for all,” he added.
An audience member asked Mr Webb about the fact that Ms Altmann effectively scrapped Mr Webb’s ‘pot-follows-member’ approach to solving the problem of multiple small defined contribution pension pots.
He responded that the current pensions minister was right to prioritise things like ensuring orderly roll-out of the new state pension and auto-enrolment for smaller companies, but noted that at some point the government will have to “tackle the small pot shrapnel”.
He admitted that his version – which is still on the statute book – was not perfect or loved by all of the industry, but argued that it will work and hoped that consolidation of small pots would be engaged with further down the line.
peter.walker@ft.com
