How Pension Wise sessions will work

Pension Wise is available to anyone, but is targeted at those aged 55 and over who want to make a decision around how to take their pension benefits.

None of the experts spoken to by FTAdviser in February 2015, including Tpas, were able to give us a full picture of what the Pension Wise session would typically consist of as this is all being finalised ahead of the reforms coming into force.

What we do know is that a Pension Wise session is expected to last around 45 minutes, after which a saver will be presented with a document outlining everything covered and an explanation of their own circumstances. All guidance staff will be level 3 qualified.

The session should go over the position of the saver in respect of all of their pension savings and entitlements, before outlining each of the options open to them and the major consequences and considerations of each, not least in terms of tax.

Speaking at an FTAdviser event last month, Michelle Cracknell, chief executive of The Pensions Advisory Service, outlined that the service will generally work through five options:

• doing nothing immediately if do not need to access pension;

• buying an annuity;

• taking flexible income, either through drawdown or by taking irregular cash lump sums;

• taking the whole pot as cash, including through trivial commutation; and

• using a blended approach combining different products.

She added that the session will deal with issues such as how rules may differ across schemes, and prepare individuals to consider their needs throughout what is likely to be a longer retirement than they may previously have expected based on likely life expectancy estimates.

Crucially, it will also signpost places for further information, including in appropriate cases highlighting regulated financial advice. This is set to be done through the Money Advice Service adviser directory, though at the time of writing this had just 1,900 registrants.

Speaking to FTAdviser, Ms Cracknell added the guidance delivered by Pension Wise is about getting people started on their retirement journey so that they can understand their options, ask the important questions and feel ready to take the next step.

In terms of accessing guidance, the service will be signposted in packs sent by providers, who must also flag the service when consumers get in touch about accessing their benefits.

After they have viewed the website, or even if they do not wish to do so, individuals will have to book a telephone or face-to-face session around two weeks in advance, which Ms Cracknell and others said would give them a chance to dig out all of the information related to their savings pots.

Darren Philp, director of policy and market engagement at The People’s Pension, says he understands that savers can have multiple sessions.

Citizens advice will operate the face-to-face element from 50 of its bureaux, which it refers to as ‘delivery centres’. It says these will work with other sites according to their own local geography, making guidance available at more than 500 locations.

In terms of how effective it might be, Mr Philp says: “We are hopeful that the service will point people in the direction of professional advice where that is in the individual’s interests. However, we are not clear how well Pension Wise will prepare savers for this next stage.”

Richard Wilson, policy lead for defined contribution at the National Association of Pension Funds, says it is important to understand the limitations of the document handed out at the end of a Pension Wise service, making referrals for further information all the more important.

Andrew Tully, pensions technical director of MGM Advantage, says it is crucial that there needs to be clear hand-offs from guidance to professional financial advice and that this is understood by those who receive a Pension Wise session.

He says: “Guidance can help people narrow down their list of options, and for some people that may be sufficient.

“But many will need help in working out the best option, and then deciding which provider or provider offers the optimum solution which best fits their circumstances. Financial advisers do that, so it is vital the guidance highlights and promotes financial advice.”