Morrison Blog: Pension wise or pension whys?

In May 2014, Steve Webb, addressing the Treasury Select Committee, indicated that the Guidance Guarantee "would be fairly basic ... fairly rudimentary ... fairly general ... but enough to get people to the starting gate". He finished off by saying "we're not expecting someone to have a post doctorate degree to deliver the guidance guarantee". This has now been confirmed by the recruitment adverts coming out for both The Pensions Advisory Service and the Citizens Advice Bureau, each requiring different levels of pensions knowledge and experience.Now, I am not going to spend time specifically on qualifications and experience, other than saying that pensions is a subject that can be far from straightforward. (I know this is true – after 30 years I still don't know all the answers.)Taking a paragraph from the job application used by the Citizens Advice Bureau gives us a good indication of the mission statement for the Guidance Guarantee:"...a specialist, high-quality pensions guidance service to people with complex pension scenarios, providing ... accurate and personalised information and guidance on the choices they face .... You'll help people understand the implications of their financial decisions [and] ensure they're aware of the dangers of fraud and scammers ...."A laudable mission statement, although seemingly at odds with the quote from the Pensions Minister.Last week it was formally announced that the new service would be called 'Pension Wise' (I like 'Pension Whys'), and that it would aim to give guidance on "what you can do with your pension pot, the different types of pension and how they work, and what's tax-free and what's not".{desktop}{/desktop}{mobile}{/mobile}All good so far, but a few things immediately jumped out. Does the new service offer guidance on pensions or guidance on retirement? I have spent the last few years trying to convince people that retirement planning is more than just pensions planning. In effect, it should be a combination of financial resources, a projection of life goals, an understanding of risk and longevity, with a bit of knowledge of state benefits and debt management thrown in.The build-up to the service has relied on the assumption that the people who use the service will generally be those with small pots who would never consider taking advice. I think this makes sense but I am not sure that this will be the whole picture. As I understand it, the service will be available to all those with a money purchase pension. I am sure there will be people with substantial assets looking to use the free service as they do not appreciate the value of financial advice. They could well have more complicated situations – will they be seen by the same Guidance Guarantee agents or will there be any differentiation?In my opinion a knowledge of the complexities of occupational and personal pensions will not be enough to provide the sort of guidance that I think is intended. The key could well be knowledge of taxation and state benefits.Add to this the low average pension value in the UK and I come back to the need for financial planning, of which one component is pensions advice.The big problem is the extent of the difference between what people will expect from the service and what will be seen as a successful outcome by the person considering their options.At this juncture I would make the point that I have been a financial adviser. I have seen clients considering retirement and before that I worked for an employee benefit consultancy and have run information sessions for pension scheme members (a day full of 30 minute sessions and a long list of attendees).{desktop}{/desktop}{mobile}{/mobile}In my view, people will want to be told what to do and want a defined solution, or steps towards a defined solution, and I don't think this is what the guidance service will seek to offer.I cannot get away from the feeling that the service will be something akin to a 'decision tree' to get thoughts into order, to promote the importance of not listening to scammers and to point people in the direction of paid financial advice. (Failing that, an execution-only deal – where there is a commission that might not be prominently disclosed.)The disconnect for me is that the service will not be accountable for what people do as a result but that the recipients of the service may not understand this. Advice is what you pay for and as you pay an adviser he becomes accountable for doing the job and providing the service.One theory seems to be that the aim of the guidance service is to protect people from themselves – if this is really the concern then perhaps we did not need to go so far with the reforms. Interestingly, recent research from ILCUK suggested that 71% of people wanted a guaranteed income in retirement.I am sure the proof of the pudding will be in the eating.

Morrison Blog: Pension wise or pension whys?

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