Industry experts are calling on the Money and Pensions Service to set up a free pension advice service to help those on low incomes.
The recommendation has been made during the government guidance service's consultation with the industry on its strategy going forward.
Maps had asked various stakeholders for their opinions on how it can improve the guidance it gives to individuals and how it can encourage people to engage with their savings.
The Low Incomes Tax Reform Group, an initiative from the Chartered Institute of Taxation, which responded to the consultation, argued that the existing guidance model offered through Pension Wise was inadequate.
The industry body proposed the guidance service should launch a pension freedoms advice platform, which could be delivered either by upgrading Pension Wise to provide such advice, fully funded by Maps, or by subsidising the creation of a charitable body to which financial advisers might give some time for free.
Maps, which was made up of the merger of Pension Wise, the Money Advice Service and The Pension Advisory Service, officially launched in April 2019 and is a joined-up service for everything guidance, from debt help to money and pensions guidance.
LITRG said its recommendation would help tackle the problem of people withdrawing their entire pension pots and putting the money in the bank instead, through which they trigger potentially avoidable tax charges and benefit withdrawal issues.
For those with only small pension pots, for whom every penny counts, such mistakes can increase their risk of slipping into poverty in older age, it added.
According to Victoria Todd, head of LITRG team, people on low incomes don’t necessarily have hugely complex financial affairs "but often they can struggle to understand and knit guidance together," so they need a more managed, tailored approach, based on their individual needs and circumstances.
She said: "Maps’ vision is ‘everyone making the most of their money and pensions’ – we wholeheartedly agree with this vision and fixing the advice gap would be a good starting point to achieving it.
"In conjunction, an automatic default into an advice appointment would provide an extra layer of protection for the most vulnerable."
Ian Neale, director at pensions specialist Aries Insight, shared a similar view.
He suggested to Maps that government should create a National Wealth Service for financial advice, in an allusion to the National Health Service.
He said: "There is guidance available if you know where to look for it, and the advent of the internet has helped. We’ve all had the experience, though, of feeling more confused after reading about options we hadn’t even imagined before we started looking.
"And as we all know, guidance is about what you could do: what people really need to know is what they should do, i.e. they need financial advice."
Mr Neale noted that the word advice was already embedded in Maps debt advice.
He said: "We might describe that as advice to the financially ill, about what they should do to get better.
"Through the NHS, we can get advice if we are physically or mentally ill; and crucially, more and more money is being allocated by the NHS to preventative healthcare – advice on how to avoid getting ill. That is the vital next step we need to take to avoid becoming financially ill, to access financial advice."
He added: "In the national interest, people’s financial well-being is just as important as their health. You should be able to see a financial adviser when you need to know what you should do about it."
maria.espadinha@ft.com
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