Cost of Pension Wise revealed

Cost of Pension Wise revealed

Pension Wise, which is financed by a levy on the financial services industry, has spent £76.7m since it was created in 2015, it was revealed.

In a written answer to Parliament last week (17 July), Baroness Buscombe, the parliamentary under-secretary of state for pensions, said the guidance service spent £31.7m in 2015 to 2016, £24.4m in 2016 to 2017 and £20.6m in 2017 to 2018.

Online and telephone guidance service Pension Wise was set up by the government to help those approaching retirement decide what to do with their pensions, following pension freedoms being introduced in April 2015.

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Pension freedoms gave over-55s more freedom to spend their retirement savings how they wished.

Financial advisers contribute to the cost of running the service via Financial Conduct Authority (FCA) collected levies.

For the running of Pension Wise, advisers will pay £2.1m a year in 2017 to 2018.

According to Craig Harrison, managing director at Creative Wealth Management, it is difficult to make a judgement on whether this represents value for money without seeing the usage numbers.

Nevertheless, he said it did seem like an awful lot of money.

Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, said: "It is an obscene amount of money that is largely being used inefficiently.

"I refer a number of prospective clients who are looking to draw their pension benefits to Pension Wise for further guidance. 

"However, the issue we find is that sometimes you have to wait two to three months before you can have an appointment, whether it is face to face or telephone. This can put a lot of people off."

Statistics published by the regulator in June last year revealed a shockingly low take-up of government guidance services.

In its 48-page Financial Advice Market Review Baseline report, the FCA stated of those aged 55 plus and planning to retire in the next two years, less than half (44 per cent) had used at least one form of guidance or information.

However, the FCA revealed only 10 per cent had used The Pension Advisory Service (TPAS) and only 7 per cent used Pension Wise.

In her answer to Parliament, Baroness Buscombe argued, nevertheless, that Pension Wise customers are "significantly more likely to answer questions about their pension options correctly".

According to research published in October 2017, savers who have used the guidance service are also much more likely to have calculated how much income they would need in retirement, shopped around for quotes, and considered how much tax or charges they would pay based on their chosen options, she added.

The survey also revealed 49 per cent of customers looked for advice after having a Pension Wise appointment.

Pension Wise will later this year be merged with Tpas and the Money Advice Service under the new Single Finance Guidance Body, which will be led by John Govett, deputy chairman of Basildon and Thurrock University Hospitals NHS Foundation Trust.