Industry experts have reported employer doubts over the effectiveness of the guidance guarantee, but have also predicted the service could act as a catalyst to review their financial education programmes.
Earlier this week the government unveiled the branding for the guidance service – called Pension Wise – which will be made available from April.
Commentators have raised concerns about how the service will be delivered and whether it will enable savers to make appropriate decisions about their retirement savings – which can be taken as a cash lump sum following last year’s Budget.
Jonathan Watts-Lay, director at corporate benefits adviser Wealth at Work, said it had been “overwhelmed” with enquiries from employers concerned their staff will not be fully prepared for retirement.
He said: “The one good thing about the guidance guarantee is that it’s acted as a catalyst for companies to say, ‘Hold on a minute, we’ve never really got our financial education programme off the ground – we’re not really sure the guidance guarantee is going to do it, but it has made us think we should be doing it ourselves as an employer’.”
Watts-Lay added members could be left “in limbo” by the guidance, as many conversations will end with the member having to go back to their employer to get further information.
The extent to which employers and trustees engage their consultants to add further communications will be driven by the available budget... and an acceptance of the risk that comes with engaging with members in this complex area
Angela Seymour-Jackson, Aegon
Earlier this week the £20m Manchester Airport Group's 2,500-member defined contribution scheme announced it had chosen Buck Consultants to deliver its pensions administration and technology services in light of the April changes, and will include guidance on the reforms.
David Piltz, head of trustee services at Buck Consultants, said it was in the process of developing tools for its clients' members approaching retirement.
"With flexibility comes responsibility," he said, adding that increased financial education or online tools in the workplace should not take the place of the government’s guidance.
He said: "I would like to think the guidance guarantee would be used by all parties as a kind of sense check."
Cost and efficacy
Angela Seymour-Jackson, managing director of workplace solutions at provider Aegon, said one-to-one engagement methods would be the most costly to employers and it expected this to remain rare in the workplace.
She added: “The extent to which employers and trustees engage their consultants to add further communications will be driven by the available budget, the degree of paternalism for the sponsor, the interest levels among the membership and an acceptance of the risk that comes with engaging with members in this complex area.”
Jamie Smith-Thompson, managing director at financial adviser Portal Financial, said some employers were cautious about online tools crossing the line between guidance and advice, as members could have recourse if that advice leads to an unsatisfactory outcome.
Smith-Thompson said the relatively low contributions from auto-enrolees means employers cannot warrant the cost of bringing in external professional advisers.
If the government gets it right, the guidance could have a positive knock-on effect, with people then seeking professional advice after receiving initial guidance, he said.
But he added: “There are two extremes that could happen, [one] is the guidance turns out to be worthless and undermines what we try and do as advisers.
"Or the people providing the guidance don’t know where the line is and overstep the mark, in which case people are going to be left in positions they should never have been in.”
