Altmann blames providers for death of default guidance

The government has removed an amendment to the Financial Guidance and Claims Bill, which would have automatically enrolled people into money guidance at the point accessing their retirement funds.

The amendment, inserted during its passage through the House of Lords, was removed yesterday (25 January) and replaced with a rule requiring providers to ask clients whether they have taken guidance, not enforce a formal opt-out procedure akin to auto-enrolment.

The pension freedoms cannot work properly for customers if they do not have anyone to help them understand the vital issues they need to know before they take money out of their pensions or transfer to new schemes.

The government established a new guidance service, Pension Wise, to provide just such independent, unbiased free help to the public and take-up has been dreadfully low.

The hard work of the House of Lords in introducing the amendment that would see everyone who does not have an independent financial adviser automatically enrolled into the free guidance service, is in danger of being undone.

This is a very sad day for consumer protection and I am disappointed that the pensions providers have not supported this sensible change that would see so many more of their customers better protected.  

Unfortunately, providers seem uninterested in whether people understand the risks and implications of irreversible decisions and too often direct their customers to their own telephone helplines, which cannot and do not provide independent, unbiased help.

It is in the interests of the industry, as well as consumers, that more people have proper help to understand the tax implications of moving their money out of their pensions.Ros Altmann

Pension Wise has managed to stop some people falling for scam schemes, especially after they were caught by cold callers, but unless more people take-up the guidance that is on offer, increasing numbers of people will lose out.

Of course it might be bothersome for providers to have to automatically make an appointment for customers who want to transfer money out of their pension, and maybe they are concerned that the costs of the free national guidance service (which they fund) would increase as more people take advantage of it, but surely that is a small price to pay for better customer protection?

It is in the interests of the industry, as well as consumers, that more people have proper help to understand the tax implications of moving their money out of their pensions, and also have someone to help them avoid scams, as well as recognising the value of remaining invested, rather than taking money out of their pension too soon.

Auto-enrolment into pensions has been a success because, although people can opt out, very few have done so.

But putting people into pensions is not the only important aspect, it is also vital that once they have money there, they are protected and helped to understand how to make the right decisions.

That is why they should also be automatically enrolled into the free guidance service, if they have no independent adviser.

It is simply not sufficient for customers to have to rely on their pension provider.  And providers already have a duty to 'signpost' people to Pension Wise, however this is simply not working.

So most customers, without an independent financial adviser, end up relying on their provider. But the provider clearly has a vested interest in selling only their own products - even if they are more expensive or less suitable than others in the market.

And, once customers have decided to move their money away, the provider has little incentive to spend time checking whether they are moving to a bona fide scheme.

By contrast, if customers have a free, independent source of information to ensure they know how to understand the costs and risks of transfers, their money will be much better protected.

I do hope that MPs will resist the government's attempt to remove this clause from the bill.