Although the original objective of providing generic information to consumers who were facing decisions about their pension options following the introduction of the new freedoms sounded attractive, the reality is that the practicalities were fundamentally flawed.
As a government scheme, funded predominantly by the taxpayer and the advice sector, it has the impossible task of providing generic information and guidance which helps consumers reach conclusions without falling into the trap of giving advice with all its regulatory and legal implications.
Advisers understand only too well that there is a world of difference between the holistic, personal service they provide, based on a thorough understanding of a client’s financial circumstances and long-term goals, and a consumer’s telephone conversation or meeting with Pension Wise.
For the consumer however, the great danger is that a generic discussion about his pension choices with Pension Wise will to him feel very much like advice, even though at the end of it, his problem remains unsolved.
The same amount spent on Steve Webb’s vouchers idea could have funded about 130,000 financial advice consultations. Ken Davy
The inevitable result is frustration for the consumer.
The Pension Wise website states very clearly that it will not advise on particular products or companies, however, just two weeks ago, Melinda Riley, head of policy, technical and advocacy at The Pensions Advisory Service, was challenged on this point by an adviser and she had to reaffirm that Pension Wise staff were not giving advice by default.
Importantly, in Steve Webb’s presentation, he went on to say that a better use of the money spent on Pension Wise might have been a voucher scheme allowing consumers to see a financial adviser at a discounted rate.
The fact is the government has already spent £22m on setting up the service and has pledged a further £19.5m for 2016, of which £4.7m is coming from adviser firms.
Figures up to August this year show that just 18,000 consumers had consultations with Pension Wise.
According to my calculations, if we annualise that figure and ignore the £22m set-up costs, it is actually costing Pension Wise more than £722 to deliver each consumer interview.
By comparison, the same amount spent on Steve Webb’s vouchers idea could have funded about 130,000 financial advice consultations with a fully authorised adviser. Now that really would have been a wise pension benefit for consumers.
Ken Davy is chairman of SimplyBiz Group