The Financial Services Consumer Panel (FSCP) has criticised the government’s free guidance service Pension Wise and has stressed the need for consumers to be provided with independent advice and guidance.
In its submission to the Work and Pensions Select committee’s inquiry on pension freedom guidance and advice, the FSCP said restrictions placed on the Pensions Wise service had brought its effectiveness into question.
Concerns were raised over the low numbers of people using Pension Wise, suggesting more transparency was needed in this area to determine whether the service is leading to better outcomes for consumers.
The issues raised by the FSCP follow recent reports that only around a quarter of clients that contact pension providers have done so following consultation with Pension Wise.
The FSCP said: “The Pension Wise guidance service is essential to help people navigate the new pension freedoms, but it is not clear at present that it will lead to better outcomes for consumers.
“The government needs to be more transparent about how Pension Wise is performing, and what would be considered good outcomes. The panel believes it should regularly publish management information to show what proportion of eligible people is making use of the service.”
In their submission, the panel questioned not only the availability of advice, but the quality of advice on offer.
They pointed out that the standard of advice may have been compromised by the fact while the Pension Wise telephone service, delivered by the Pensions Advisory Service, requires its counsellors to have a minimum of five years relevant experience, Citizens’ Advice, which delivers the face-to-face service requires no prior experience, expertise or any relevant qualifications.
On this issue, the FSCP said: “We believe that the level of service required by consumers in this area can only be delivered by confident, competent, experienced professionals who do not have to rely on a script.
“They need to be as qualified and experienced as regulated financial advisers.”
One possible resolution suggested by the panel to combat the lack of information available to consumers, on what level of income they might achieve if they choose a particular product or lump sum, was to provide a universal retirement income calculator.
The FSCP said: “Ultimately, it is essential that Pension Wise provides consumers with information about what level of income could be achieved either through the purchase of a guaranteed income, using certain assumptions. This could be achieved by building a universal calculator.”
Last month FTAdviser reported only around a quarter of clients that contact pension providers do so after having used the government’s free guidance service Pension Wise.
FTAdviser contacted a number of firms, finding that after the initial rush of people wanting to get their hands on pension pots, guidance service users rose and stablised at around 25 per cent.
Robert Cochran, pensions development manager at Scottish Widows, told FTAdviser they went from around 3 per cent in the first week - “which is no great surprise given the pent-up demand” - to 30 per cent by week five and then settling since then to between 26 and 30 per cent most weeks since.