The government has spent £17.8m advertising its free Pension Wise service since 2014, the minister for pensions and financial inclusion has revealed, despite only 12% of eligible customers using it.
The spend was disclosed by Guy Opperman, pictured left, in a letter to Frank Field, MP for Birkenhead and chair of the Work and Pensions Committee, though the minister insisted that this represented a good investment for the the government despite the low take-up.
In his letter responding to questions asked by Field, Opperman said that take-up for the service had been “very responsive” to paid advertising, “which encourages the target audience to book a telephone or face-to-face appointment or to visit the website”.
He said: “For example, immediately following the January 2017 TV campaign, the service experienced record levels of demand (appointment bookings and web visits) and delivered record numbers of appointments in both February and March.”
Pension Wise is a free government service that seeks to help older citizens to understand what they can do with their pension pot money in the light of the pensions freedoms that were announced in the 2014 Budget to start in the 2015/16 tax year.
Pension freedoms mean that anyone aged 55 and over can take their pension pot as a lump sum, paying no tax on the first 25%, with the rest taxed as if it were salary at their income tax rate.
Pension Wise offers guidance on its website about the options for taking one’s pension pot, and seeks to help users understand the tax implications of doing so.
It offers free guidance appointments over the telephone or face-to-face for discussing these options.
However, online pension and investments platform AJ Bell found that those using professional financial advice outweighed those using the Pension Wise service by three to one, with 34% of respondents saying that they had used traditional advisers as against 12% that had used the government-backed free service.
Worryingly, some 40% didn’t seek any kind of professional or impartial advice at all, choosing to rely instead on suggestions from friends or family.
Senior analyst at AJ Bell Tom Selby, pictured left, said that financial advice or guidance can be “extremely valuable” but that the research showed that “a huge proportion of people” are not benefiting from it when it comes to pensions.
There needed to be a mechanism, he argued, to encourage more people to seek advice and guidance.
“The majority of people who get to the point of accessing benefits have already made their mind up,” said Selby, “and want their cash straight away.
Forcing them to take guidance at this stage was arguably too late, he said.
It would cause a delay in people accessing their money, which would undermine the “fundamental principle” that people over the age of 55 now have the freedom to access their pension savings “how and when they like”.
“If the Government wants to ensure people take guidance it might be better for some kind of standard fact sheet on their retirement options and appointment card for the new guidance body to be provided to everyone well ahead of the point they want to access their benefits, say age 50,” said Selby.
“This should happen alongside a fundamental rethink of the way the regulator requires providers and advisers to communicate with customers, with a fresh focus on simplification and getting messages to savers effectively.”