Shocking cost of Pension Wise service revealed

PRIVATE PENSION PAY ADVICE ON NOTICE BOARD WITH PIN
PRIVATE PENSION PAY ADVICE ON NOTICE BOARD WITH PIN



New government figures have revealed that demand for 'guidance' from the Pension Wise service has fallen - from what was already a disappointing level. There were only 3,205 appointments in December, and because the government and the pension industry invested a small fortune in the service, it means that the average appointment costs an astonishing £514.

The Pension Wise service itself has received widespread support. The service, delivered by Citizens Advice and The Pensions Advisory Service, offers independent, free guidance to people who are facing one of the most complex retirement pictures we have seen in generations. People are grappling with changing state pension ages, a new flat rate state pension (and very complex transitional arrangements) - not to forget a boundless array of options thrown up by new pension freedoms.

Those who are actually using the service are finding it very useful. The government figures show that 88% of people were satisfied with the service they received. Tom McPhail, Head of Retirement Policy at Hargreaves Lansdown says: "The availability of impartial guidance is an important element of the pension freedoms, Pension Wise provides an excellent service and most people who do use it have a very positive experience."

However, he adds: "Overall usage numbers are still pretty low. Telephone appointments from TPAS have declined steadily to just a third of demand when it was first launched."
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Not enough

The problem is that not enough people are using the service. In the first six months of pension freedoms just shy of 400,000 people accessed their pension pots. During the same period fewer than 30,000 had a Pension Wise appointment. Meanwhile, the service continues to cost a small fortune - and the government has estimated it will cost £35 million in the next tax year.

It starts to make the cost of providing each session laughably high. Given that the average pensioner could get an hour of full financial advice - tailored to their needs - for less than £200. It begs the question of whether the government ought to be offering that instead of spending more than £500 a time on sessions that can merely offer untailored 'guidance'.

Likewise, the government has pointed out that the Pension Wise website currently works out as £0.31 per website visit - which is up 10% since November. The site has been criticised for not working hard enough to engage consumers and not offering enough tools, so again it begs the question as to whether 31p per visit offers good value for money.

What will you retire on?


McPhail suggests: "Policymakers need to improve the take-up or to make sure suitable alternative solutions are in place."

The question is what this alternative should look like. Some advisers have suggested spending the money on tailored advice instead. Others would like to see a more lively and engaging version of the guidance system, while others want the government to work harder to get people to use the services that are available.

McPhail points out that: "Any pension investor should be able to receive good quality guidance and support from their pension provider because this is where most of them turn to."

But what do you think? Should Pension Wise continue to spend too much money on too few clients - in the hope that the number of people using it picks up enough to balance the books. Or has it become a pointless waste of money? What do you think? Let us know in the comments.


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