OpinionNov 13 2015

Why Pension Wise was Webb’s only option

Search supported by

Last week the former pensions minister Steve Webb said that the free guidance service brought in to assist retirees with the pension freedoms has “not got the coverage we would have hoped”.

In hindsight, he wondered whether the money spent setting up and running Pension Wise should have instead gone towards some form of “cheap advice” via a voucher system enabling consumers to see an actual IFA.

He said: “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.”

The consensus among advisers was “told you so” rather than “yes, we would have loved to receive a voucher to pay for initial pension freedom advice”, or so it would appear from the comments underneath the article this time last week.

Perhaps it is time for such as scheme to operate alongside Pension Wise - what were the freedoms about, if not choice? Emma Ann Hughes

As a result I say to Mr Webb – stop beating yourself up.

The fact regulation has shrunk the size of the adviser market and the manner in which chancellor George Osborne startled the world by delivering pension freedoms with no forewarning, meant – gulp – Pension Wise was the only option at that time.

There – I’ve said it.

Something had to be set up virtually overnight and reversing the trend of regulation shrinking adviser numbers was never going to happen swiftly.

What we really needed was a Financial Advice Market Review and a regulatory regime that made advisers confident they would not face unlimited liability prior to people being given access to their pension pots.

We needed to grow an advice industry capable of meeting the demand for help – that would have been ready and willing to offer advice to those who cannot afford the fees commanded by the comprehensive service intermediaries offer today.

The reality of today’s financial advice market?

In 2007, two-thirds of retail investment products were sold with professional advice. This conjunction of professional advice and product sales is also a feature in other countries.

However, in recent years the Financial Conduct Authority reported it had seen a decline in the number of financial advisers offering professional advice – from around 26,000 in 2011 to 24,000 in 2014.

The regulator’s product sales data suggests that the proportion of retail investment products (including pensions, retirement income products and investments) sold without advice has increased, from around 40 per cent in 2011 to 2012 to around two thirds in 2014 to 2015.