It is good news that the government now plans to merge the Money Advice Service (Mas), the Pensions Advisory Service (TPAS) and Pension Wise.
A one-stop-shop for people needing impartial financial guidance will reduce duplication and consumer confusion. It will reduce the arbitrary divide between planning for retirement and making retirement income choices.
As ever, the devil will be in the detail. There is no doubt that the job Parliament set Mas up to do still needs to be done. A recent Organisation for Economic Co-operation and Development (OECD) survey of adult financial literacy placed the UK 15th out of 30 countries, below the average for OECD countries and barely above Thailand and Albania.
So, the first job the new body needs to do is to lead the national strategy for financial capability: identifying gaps and finding ways to fill them; being a centre of expertise on what works. Mas saw itself as the co-ordinator of the strategy.
That is not enough: the new body must own and lead the strategy, and needs to have a sponsor government department to give it the clout to do so.
Ministers have set out a vision of a public guidance service. The Financial Services Consumer Panel believes this means keeping the public-facing Mas brand.
Mas has had a checkered history, and doubtless gone off piste too often. But it takes time to build a brand and the signs are that the much-criticised investment is beginning to pay off.
In 2015-16, 26m people contacted Mas and 86 per cent said it provided them with the help they needed. In addition, 3.6m people completed one of the Mas tools. Two thirds of people contacting Mas do so through organic search, which means consumers find it naturally.
Apart from Mas, there is no public-facing, impartial, single source of money guidance. Commercial organisations cannot fill the gap. Impartiality is very important for trust. Consumers want financial guidance in an environment where people will not try to sell them something.
On the other hand, many third sector bodies have a brand that is associated with being somewhere to turn to if you have a problem. The Citizens’ Advice website, for example, refers people to Mas for preventative advice, such as the financial ‘healthcheck’.
There is a risk that the new body will be overwhelmed with the cost of debt advice. We believe it needs to focus more on prevention. That means working closely with the FCA to help stop people from getting into problem debt. This goes beyond giving more information to consumers, but also helping raise standards in firms’ practices that demonstrably lead to poor consumer outcomes.
In the light of pension freedoms, it is all the more important for people to have access to a source of impartial guidance on personal finance throughout their lives. Auto-enrolment may get people saving, but it does not prompt them to think about whether they are saving enough or, for example, about protecting their families.
Nor does auto-enrolment cover people on very low incomes, or the self-employed. Moreover, the Lifetime Isa will blur the distinction between ‘saving’ and ‘accumulating a pension pot’.
Finally, I would urge the government to ensure that the new body keeps the same high standards as TPAS for all pensions guidance. TPAS advisers are required to have several years’ industry experience and can give guidance on a wide range of complex issues and needs relating to all aspects of pensions and retirement without a script. This will be particularly important for guidance associated with secondary annuities.
Sue Lewis is chairwoman of the Financial Services Consumer Panel
