Good guidance around the point of retirement will not be enough to ensure individuals manage the shape of their income in later life effectively, industry commentators have said.
Since the introduction of the new pension flexibilities in April, government and the industry has grappled with how to get savers to make sensible decisions about how they draw an income in retirement.
The Pension Wise service was established to provide guidance to savers via channels including face-to-face and over the telephone, however take-up so far has been relatively low.
Nigel Stanley, former head of campaigns at Trades Union Congress and trustee member of mastertrust Nest, said guidance and robo-advice could be useful tools but it is also important that members have the ability to continually “tweak” their input details and other criteria over time.
“People will make sensible decisions that turn out to be wrong decisions because something happens,” he said at law firm Eversheds’ annual pensions conference on Thursday. “People won’t know they’ve made the wrong decision until they’re dead, by which time it’s too late.”
The two things that have always gone wrong in pensions is market innovation and personal responsibility
Nigel Stanley, Nest
Stanley also criticised the so-called freedom and choice reforms, saying it was not clear what problem they were trying to solve.
“No union has ever called a strike because there’s not enough choice in a DB scheme,” he said, adding: “The two things that have always gone wrong in pensions is market innovation and personal responsibility.”
Michelle Cracknell, chief executive officer at The Pensions Advisory Service, which provides guidance to members, said guidance should form the “aperitif” of a wider advice or robo-advice process.
She said many members fail to understand what types pension assets they have and would therefore get the wrong outcome from robo-advice without first seeking guidance.
“Our biggest step one is understanding what the customer wants and needs,” she said, adding: “Putting a warm arm around somebody’s shoulder and helping them decide what to do is vitally important.”
Cracknell said the independent nature of TPAS better enables it to “challenge individuals” as the service does not have any products to push. TPAS received around 100,000 calls from members in the first six month of this year and is delivering the service currently at a cost of around £38 per member.
From planning to delivery
Neil Carberry, director for employment and skills at business employer body the CBI, said several years of pensions policy planning has now reached the delivery stage where major challenges are arising.
“One of the challenges we have now is people in Whitehall that think this is all delivered,” he said, speaking in particular about auto-enrolment.
Recognising the need for people to save more, Carberry questioned the “blunt tool” of government policy moving the cost away from the state and towards employers and said it is premature to start talking about raising contribution minimums when many employers are yet to start auto-enrolment.
Carberry added: “The thing that worries us most is that question of, if you don’t have employer commitment to give more than the statutory minimum, how do you deliver that?”
