The pensions minister has accused pension providers of using wake-up packs to mis-lead savers into thinking they offer financial advice.
Baroness Ros Altmann said before you get to a mention of the government’s guidance service in the wake-up packs being sent out by providers to highlight pension freedoms, savers have to get through at least a page of text from their current pension provider.
Speaking to FTAdviser at the Department for Work & Pensions offices, Baroness Altmann said providers were telling savers what pension they have and “how lovely it would be for you to phone their helpline and get their experts to help you.”
She said she had seen examples of wake-up packs where savers could easily have been misled into thinking if they phoned the providers helpline then they would receive individual financial advice.
She added the wake-up packs are “very cleverly worded” so that by the time a person gets to guidance service Pension Wise’s phone number, it was likely they would have called their provider and believe they had spoken to an expert.
Baroness Altmann said: “I can quite see why the individual will think I don’t need this Pension Wise. I have had this conversation with my nice provider’s expert helper who is actually, of course, a salesman.”
When asked would she make any changes to the requirements for providers to offer wake-up packs, Baroness Altmann said she is considering lowering the age at which people are sent the wake-up packs from their providers to 50.
They are currently sent to anyone who is within six months of their retirement date, she explained.
The pensions minister added the age for the government’s free guidance service has already been brought down to 50 - five years before people are allowed to access pension freedoms.
She explained the aspiration behind sending out wake-up packs at an earlier age is to help people understand the last money an individual should ever spend is from their pension.
Baroness Altmann said: “The best thing that a person could probably do six months before reaching their pension date is just to leave it alone and keep it growing tax free and that there is no rush to take money out.”
The Financial Conduct Authority declined to comment on Baroness Altmann’s findings.
However, according to the FCA, firms are required to comply with Treating Customers Fairly principles and not mislead customers.
Through the FCA’s rules, firms are required to encourage customers to us Pension Wise and not do anything that might undermine the service.
According to the FCA, the regulator is currently working with firms on behavioural trials to see how communications might be improved both in wake-up packs and conversations about the Pension Wise service.