26.The creation of Pension Wise, the free government guidance service, alongside the pension freedom reforms was tacit acknowledgement that a gap in support was anticipated. Existing free services and the advice market were unlikely to provide sufficient assistance to consumers exercising the new pension choices. In Chapter 2 we highlighted the regrettable scarcity of published statistics about Pension Wise. However, it is clear that take-up of face-to-face and telephone guidance sessions has been lower than many had expected. As the service was created to fill an anticipated gap in support, this is a concern. We also heard evidence that the guidance on offer could be refined to better meet customer needs.
27.Pension Wise was launched in March 2015, shortly before the pension freedom reforms came into practice. Expectations of take-up rates were high. Michelle Cracknell, for example, told the Public Bill Committee on the Pension Schemes Bill in October 2014 that “ambition is that the take-up rate will be very high, with over 75% of people taking the guidance”, though she anticipated it might be 25% to start with. In reality, fewer than one in ten people who accessed their pension pots during the early months of the reforms had taken up a guidance appointment (though many more may have looked at information on the Pension Wise website).
28.Early publicity for the service was limited by pre-election “purdah” restrictions on Government communications. National Association of Pension Funds (NAPF) research at the time suggested that less than one quarter of people aged 55-70 were aware of Pension Wise and understood what it did. The Government launched a marketing campaign in August 2015, which we were told had increased take-up. We also heard that publicity for the reforms and Pension Wise had generated greater demand for other sources of guidance and advice, both public and private.
29.Pensions industry representatives argued that Pension Wise take-up may be low because consumers are more comfortable talking to their existing provider. Joanne Segars, Chief Executive of the NAPF, and Huw Evans both cited the “trust” that comes with long relationships. Hargreaves Lansdown told us that people tend to take the path of least resistance, which would mean calling their established firm. However, in explaining why it was seeking independent guidance providers in its July 2014 response to its Freedom and choice in pensions consultation, the Treasury cited support from “the vast majority” of respondents for guidance to be provided by organisations without a “vested interest”. This is unsurprising given the failure of many of those vested interests in the recent past to put the needs of customers first. Teresa Fritz said that if low Pension Wise take-up meant that consumers were going to their providers instead “that is not good for anyone” as Pension Wise was designed to make people “slow down” and consider their options. Take-up was therefore an urgent concern. Which? concurred, arguing that increasing take-up of Pension Wise should be a priority”
30.Age UK told us that they were concerned that the system of pension providers giving risk warnings to consumers and signposting them to Pension Wise was not functioning as intended. Similarly, the Financial Services Consumer Panel said that providers may have been following “the letter but not the spirit” of the rules requiring them to point consumers to the service. The Association of Professional Financial Advisers (APFA) said that pension providers needed to give Pension Wise more prominence in communications. Which? called for a system whereby providers could book customer Pension Wise appointments directly. Others advocated expanding the range of organisations that signpost to the service and promoting more interaction between Pension Wise and employers.
31.Pension Wise was created to fill a potentially dangerous anticipated gap in support for consumers, including for many people who are unable or unwilling to pay for independent advice. Low take-up of its service is therefore a concern. The Government’s renewed marketing campaign is welcome and the publication of regular take-up statistics will allow the situation to be monitored.
32.Pension providers are a key point of contact with their customers. We recommend the FCA strengthen its rules and guidance for pension providers regarding Pension Wise signposting and risk warnings; and assure compliance through mystery shopping exercises. We further recommend that the number and proportion of customers that contact Pension Wise having been signposted there by each provider should be tracked and published in regular statistics.
33.Witnesses argued that Pension Wise guidance should be broadened to encompass wider personal financial circumstances. We were told that neglecting factors such as property wealth, benefit entitlement, and care costs limited the usefulness of sessions. While the FCA’s standards for guidance providers requires consumers to be given information about “the potential tax implications or debt obligations” of the broad decumulation choices on offer, such support would be more effective if it was tailored to individual situations. The Financial Services Consumer Panel told us that unless Pension Wise covered retirement income more holistically, taking account of an individual’s wider financial circumstances, there was a danger that guidance would be “meaningless”. Citizens Advice told us that they would like to offer a more personalised service, including assisting people with paperwork, which is currently beyond the scope of a Pension Wise appointment. Age UK said that the narrowness of Pension Wise guidance was creating knock-on demand for other free guidance services. Teresa Fritz was more concerned that if those seeking guidance were referred to other services they would be lost.
34.We were told by the FCA and the Minister that consistent standards meant that outcomes from each of the three Pension Wise delivery channels (face-to-face appointments, telephone appointments and the website) should be the same. In the absence of outcome statistics it is very difficult to judge whether this is indeed the case. However, we heard that while TPAS pension guides can if necessary provide broader expert pensions support than a standard Pension Wise appointment, their less experienced Citizens Advice counterparts do not have the same capacity. Gwyneth Nurse, Director of Financial Services at the Treasury, said that ways of making guidance appointments more personalised without constituting regulated advice would be considered in the FAMR.
35.The evidence was most critical of the online guidance channel. The Pension Wise website is static, providing basic information, “and not very well presented or engaging information at that”. It offers no interaction or, unlike the face-to-face or telephone channels, a summary. The Money Charity told us that the illustrative examples provided were static and therefore only captured “a few possible individual circumstances”. The website, they said, is so poor it falls short of offering what might reasonably be described as “guidance”. The absence of tools such as tax or income drawdown calculators leaves it well behind other online pension services. This was particularly disappointing given the evidence that consumers engage better with income illustrations than gross savings.
36.In time a “pensions dashboard”, which would enable individuals to access consolidated information about all their pension savings in one place, may facilitate personalisation of support, prompt greater consumer engagement with retirement finances and even increase rates of saving. The introduction of a dashboard was recommended by both our predecessor Committee and the FCA following its 2014 Retirement Market Study. We heard evidence that dashboards had worked successfully in other countries, including the Netherlands and Sweden. Teresa Fritz told us that a dashboard had been “essential for many, many years”, but noted there was now “momentum” behind the proposal. Chris Curry added that the technology for a dashboard was proven and its development was now “a question of having the will and finding someone who is willing to pay for it”. Teresa Fritz thought that the dashboard would have to be “owned and held within government”, though the Minster told us that the role of government would be to enable private sector innovation in this area by removing regulatory barriers. It was reported in September 2015 that Origio, the eCommerce standards and services body for the UK financial services industry, was developing a shared pensions register portal to enable public and private bodies to provide secure dashboard services.
37.Pension Wise guidance is currently too narrow for too many consumers. Decisions about retirement income products are not best made in isolation from information on property wealth, benefit entitlements, tax implications, care costs or debts. We recommend the Government work with the FCA and guidance providers to develop a more holistic Pension Wise service that offers more personalised support.
38.The Pension Wise website is not fit for purpose. It is static, offering no opportunities for personalisation, and lags well behind many private services. This is a particular concern given it is the primary independent guidance channel for a large proportion of consumers. We recommend the Government ensure the Pension Wise website provides an indicative income calculator, illustrative examples tailored to individual circumstances and a printable summary function as a matter of urgency. Over time we would expect this service to enable customers to include other potential income and expenses in their calculations.
39.A pensions dashboard is long overdue. Pension freedom merely makes it more urgent. Enabling people to view all of their pensions in one place will leave customers better-placed to make good decisions about their retirement savings. It will also encourage people to engage with their finances while accumulating a pension. There is clearly broad appetite for this reform. Provided data security can be assured, we would welcome its development in the private sector. However, Government has an important role in ensuring that progress is maintained. We recommend the Government announce a clear timetable for the introduction of a pensions dashboard in its response to this Report.
40.Pension Wise currently offers, to individuals aged 50 or over with a defined contribution pension, a one-off 45 minute guidance session. We heard evidence that this was insufficient. Citizens Advice told us that a minority of customers would benefit from a second follow-up session, shortly after the first, to help finalise plans or to focus on options having covered paperwork in the first session. Citizens Advice were also among the range of witnesses who told us that offering further appointments at different points in the accumulation and decumulation cycle would be advantageous. The Trades Union Congress (TUC) told us that Pension Wise could “do little to support people during the full course of their retirement during which their circumstances are likely to change”. The Investment Association used the example of an individual who might access some of their pension fund through cash or drawdown early in retirement before buying an annuity later and would therefore benefit from guidance at both stages.
41.Michelle Cracknell noted that while Pension Wise has a narrow remit, other free services from TPAS, the Money Advice Service and organisations such as Citizens Advice are available. Similarly, consumers with complex needs might be better placed paying for advice. Tom McPhail, Head of Pensions Research at Hargreaves Lansdown, said that “huge resources” could potentially be poured into Pension Wise but that ideally the market would respond to meet consumer needs. APFA told us that Pension Wise might do more to explain the benefits of financial advice and stress that a conversation with a financial adviser costs nothing until a fee is agreed. David Geale, a Director of the FCA, told us that it was important that people had a range of guidance and advice options open to them and that whether multiple Pension Wise appointments should be available should be reviewed in the longer term.
42.Pension decision-making is increasingly complex. Where a large proportion of people once enjoyed defined benefit pensions or defaulted into an annuity, people are now increasingly required to take difficult decisions about their retirement savings at various stages of accumulation and decumulation. The one-off nature of Pension Wise guidance sits oddly with this reality. However, free guidance sessions can be expensive to provide and a wide range of alternative free and paid-for guidance and advice services are available or in development. In the absence of better data about Pension Wise and the pension freedom market, it is not yet clear that offering multiple sessions would be value for money. We recommend that the Financial Advice Market Review consider the case for offering two or more Pension Wise guidance sessions per customer.
63 National Association of Pension Funds (), The Money Charity ()
64 (Teresa Fritz)
66 In total, there were fewer than 20,000 completed face-to-face and telephone Pension Wise appointments between April and August 2015. The FCA found that more than 200,000 people accessed their pension pots in April-June 2015 (, September 2015). The true figure is therefore likely to be well below one in ten.
67 Age UK ()
68 National Association of Pension Funds ()
69 , (Harriett Baldwin MP)
70 (Michelle Cracknell), Association of British Insurers (), Association of Professional Financial Advisers ()
71 (Huw Evans and Joanne Segars)
72 Hargreaves Lansdown ()
73 HM Treasury, , Cm 8901, July 2014, para 3.5-7
74 (Teresa Fritz)
75 Which? ()
76 Age UK ()
77 Financial Services Consumer Panel ()
78 Association of Professional Financial Advisers ()
79 Which? ()
80 Low Incomes Tax Reform Group (), Citizens Advice ()
81 Which? ()
82 Equity Release Council ()
83 Financial Services Consumer Panel ()
84 Financial Services Consumer Panel ()
86 (Michelle Cracknell), Low Incomes Tax Reform Group ()
87 Financial Services Consumer Panel ()
88 Citizens Advice ()
89 Age UK ()
90 (Michelle Cracknell)
91 (David Geale), (Harriett Baldwin)
92 , Financial Services Consumer Panel ()
93 (Gwyneth Nurse)
94 The Money Charity ()
95 The Money Charity ()
96 Which? ()
97 David C John ()
98 Pensions Policy Institute ()
99 Work and Pensions Committee, Fourth Report of Session 2014–15, , HC 668 para 108 and Financial Conduct Authority ()
100 (Chris Woolard), (Chris Curry)
101 (Teresa Fritz)
102 (Chris Curry)
103 Money Marketing, 23 September 2015, , by Sam Brownback
104 Access to Pension Wise was extended to people with defined contribution pension pots aged 50 and above (from the previous 55) in the 2015 Summer Budget. HMT Treasury, , HC264, June 2015, para 1.227
105 Citizens Advice ()
106 Trades Union Congress ()
107 The Investment Association ()
108 (Michelle Cracknell)
109 (Tom McPhail)
110 Association of Professional Financial Advisers ()
111 (David Geale)