Steve Webb has said the possibility of a voucher system for IFAs should be explored in a bid to cut costs of the Pension Wise guidance service.
Yesterday (17 December), FTAdviser reported that each Pension Wise appointment currently costs the government just shy of £500.
Former pensions minister Steve Webb, now director of policy at Royal London, said that there is a distinction between what we do now and what was the right thing to do in April.
He said: “At that time there had to be something like Pension Wise, there was clearly a demand for information. Having said that, there is a question about whether to have the same service going forward.
“A voucher service is very interesting and could be explored. Pension Wise could be substantially streamlined and having done that, it throws up money for something like vouchers; that would be worth experimenting with.”
Immediately after chancellor George Osborne announced pension freedoms in last year’s Budget, the Personal Finance Society put forward a proposal for a voucher system for advice funded by a re-distribution of regulatory fines.
However the coalition government instead pushed ahead with putting together a guidance service, called Pension Wise, paid for by the industry.
Chris Hannant, director general at the Association of Professional Financial Advisers, said he had some reservations about the current costs on Pension Wise.
Mr Hannant said: “I wonder about the demand. Where is the money to pay for it? Everything else in the industry is paid for by levies, I can’t see how the economics work and how that’s going to improve demand.
“They [the government] pitched for demand which didn’t materialise. They’ve got enough money to pay for next year given the low take up,” he commented.
“There needs to be a rationalisation - we don’t need Tpas, Mas and Pension Wise all doing the same thing.”
Mr Hannant added if the money to fund Pension Wise is coming from the industry, he could not see how it would increase demand, adding by raising the price in one part just to gain customers in another, was just moving money around.
Steven Levin, chief executive of investment platforms at Old Mutual Wealth, said at nearly £500 a session, the guidance looks like comparatively poor value for the industry against full personalised advice which, when charged by the hour, has an average cost of around £175.
He said: “Pension Wise is a vital service for people following the introduction of the freedoms, but the financial advice sector needs to see better value over the longer term for the £4m it is being asked to contribute.”
Robert Lewis, director of intermediary Heritage Financial Solutions, said: “I have said for a number of years there should be a voucher system, where those eligible can redeem with a local IFA to cover the cost of a local meeting.