The pensions minister has accused pension providers of using wake-up packs to mis-lead savers into thinking they offer financial advice.
Baroness Ros Altmann said before you get to a mention of the government’s guidance service in the wake-up packs being sent out by providers to highlight pension freedoms, savers have to get through at least a page of text from their current pension provider.
Speaking to FTAdviser at the Department for Work & Pensions offices, Baroness Altmann said providers were telling savers what pension they have and “how lovely it would be for you to phone their helpline and get their experts to help you.”
She said she had seen examples of wake-up packs where savers could easily have been misled into thinking if they phoned the providers helpline then they would receive individual financial advice.
She added the wake-up packs are “very cleverly worded” so that by the time a person gets to guidance service Pension Wise’s phone number, it was likely they would have called their provider and believe they had spoken to an expert.
Baroness Altmann said: “I can quite see why the individual will think I don’t need this Pension Wise. I have had this conversation with my nice provider’s expert helper who is actually, of course, a salesman.”
I have had this conversation with my nice provider’s expert helper who is actually, of course, a salesman.When asked would she make any changes to the requirements for providers to offer wake-up packs, Baroness Altmann said she is considering lowering the age at which people are sent the wake-up packs from their providers to 50.
They are currently sent to anyone who is within six months of their retirement date, she explained.
The pensions minister added the age for the government’s free guidance service has already been brought down to 50 - five years before people are allowed to access pension freedoms.
She explained the aspiration behind sending out wake-up packs at an earlier age is to help people understand the last money an individual should ever spend is from their pension.
Baroness Altmann said: “The best thing that a person could probably do six months before reaching their pension date is just to leave it alone and keep it growing tax free and that there is no rush to take money out.”
The Financial Conduct Authority declined to comment on Baroness Altmann’s findings.
However, according to the FCA, firms are required to comply with Treating Customers Fairly principles and not mislead customers.
Through the FCA’s rules, firms are required to encourage customers to us Pension Wise and not do anything that might undermine the service.
According to the FCA, the regulator is currently working with firms on behavioural trials to see how communications might be improved both in wake-up packs and conversations about the Pension Wise service.
The regulator plans to publish its findings later in 2016.
Rob Yuille, manager for retirement policy at the Assocation of British Insurers, said providers continue to support the valuable role Pension Wise plays to help people make financial decisions for their retirement.
Mr Yuille said providers promote the guidance service in letters, via their website and during phone calls.
He said: “Retirement packs include a lot of important information, reflecting FCA rules. The ABI supports improvements to retirement communication to make them more engaging for customers and is working on standardising language and the proposal for a Pension Dashboard.
“In order to ensure customers are fully supported in decision making, whether they want to pay for advice or not, the ABI has called for a review and re-clarification of the boundary between advice, guidance and information, as part of our Financial Advice Market Review response.”
The Financial Advice Market Review involves HM Treasury and the FCA exploring what it will take to bring advice back to the mass market.
Neil MacGillivray, head of technical support at James Hay Partnership, said his firm’s wake-up packs clearly state throughout that his company is not offering advice.
He said: “We don’t direct investors down any given route nor suggest one route over any other.
“We can fully understand that there is concern within the market that wake-up packs could be construed as advice by investors.
“That is why it is essential that it is clearly indicated that it is not to be taken as advice.”
ABI Code of Conduct on Retirement Choices
Wake-up packs must:
* Highlight the importance of the communication and emphasise that the customer should not ignore it.
* Be clear and jargon free.
* Be targeted as much as possible to the circumstances of the individual customer.
* Set out information in as accessible and engaging a way as possible, with signposting to key information where relevant.
* Avoid inconsistencies and irrelevant information, or duplication within each pack.
* Take account of customer preferences of the appropriate method of communication where possible.
* Highlight the benefits of shopping around, and set out options including deferring retirement, commuting or amalgamating pension pots.
ruth.gillbe@ft.com
