This might seem impossible for those pension market stakeholders who have been around an industry which appears to have undergone never-ending change and scrutiny over the course of the last 30 years or so, but the level it has reached now seems extraordinarily intense.
This of course has much to do with the seismic shift in the pension market announced by George Osborne last year – namely pension freedoms – which were introduced on April 6th. Providers in particular stressed during the intervening period that it would take a colossal amount of effort from all concerned in order to get up to speed by that date and, judging by recent headlines, some have either not been able to deliver or are reticent to do so.
The recent media focus has been on those providers who are currently not in a position to allow certain pension holders the opportunity to drawdown their pots in cash, plus the process by which customers are being urged to pay for advice, the amount they have to pay for this, and potential charges levied in order for customers to move their products away from such providers. It is a series of complicated issues and the Prime Minister himself has become involved by suggesting the Government will be looking carefully at those providers who are currently not offering the freedoms as envisaged.
There have been suggestions that providers should be compelled to offer all the freedoms that have now become permissible for pension holders, however this seems like a bridge too far. Providers should be allowed to provide the products they wish, however, if they are not to allow customers their new rights to encashment then it seems reasonable to suggest they should provide a simple and low-cost way to allow them to move elsewhere to access these freedoms.
For the newly-retired who wish to secure their pension pots – and again judging by recent statistics there are a significant number wanting to do this – it might seem somewhat disappointing to have obstacles seemingly placed in their path. But one has to have some sympathy for providers because there are considerable issues to be dealt with, not least the potential spectre of future liability and, for some, a deep-seated understanding that this type of decision should probably not be made without advice being taken.
And here’s one of the major issues that truly needs to be resolved. Because while Pension Wise guidance is a good introduction to the options available, it is certainly not full advice by any stretch of the imagination. The consequences of pension encashment could be very significant for an individual, in terms of taxation, access to benefits, and a whole host of other areas. Such a decision should ideally come from a position of informed advice; it is not a finger in the air exercise, a punt or even one to be made immediately post-Guidance. It is therefore understandable that providers might be sensitive about allowing customers to make these decisions without first having taken advice and, quite frankly, having also gone through the whole range of options available to them.
Equity release is of course one such potential option for those retired homeowners but it is likely only one among many. I have talked a lot about the growing need for advisers to ensure they can cover off multiple later life areas rather than simply stick to one specific part of the market and all news emanating from our industry suggests this is the way the market is heading.
The fact is that Guidance is not enough on its own. It does not in isolation provide the individual with all the information and all the tailored, specific solutions and recommendations that are available to them. Advice can deliver this but it is a question of smoothing the pathway from Guidance to advice and making it a compelling, efficient and (dare I say it) economic road to travel. At present the pension freedoms are undoubtedly good news but they must be accompanied by a movement towards full later life advice. If not, then we run the risk of seeing large numbers of retirees acting in haste and, unfortunately, having to repent at leisure.
