Putting the cart before the horse

Decisions, decisions. Our lives present us with a constant array of decisions to be made, the outcome of which can have a hugely significant impact on not just our own situations but those of our nearest and dearest. The older we get of course, the more experience we should have in making the right decisions and we also (hopefully) should have more idea about what can happen should we make the wrong choice.

Stuart Wilson
26th November 2015
stuart wilson lla

However, there will be points in our life in which we are simply unprepared for the decision we have to make. At that point, the sensible individual will seek out guidance and advice about what to do; those who trust their own instincts may well have made their mind up before seeking such professional help, but I would always suggest this is more akin to putting the cart before the horse.

It seems however, that even with decisions as important as what to do with one’s pension there are still incredibly large numbers of people who go about their decision-making as outlined above. Anecdotal evidence from pension providers dealing with their customers in this post-pension freedom environment suggests that many of them pick up the phone already intent on what they are going to do with their pension. I might also suggest that, for most, this involves accessing at least some of that money early, when for the majority the right decision would probably be to keep it where it is.

This is of course is a message about education however, given the hype generated by some in the media around accessing a pension early and what can be done with the cash, it is not surprising that Joe Public might automatically assume this to be the right option. I can’t help but recall a gentleman, interviewed by BBC News at the time the freedoms were introduced, who informed the journalist concerned that he would be taking out his pension cash immediately – all of it – and putting as much as he could into a cash ISA.

The fact that this decision was likely to cost him dear in terms of both taxation payable and the income he could receive off that money, appeared to be lost on him. I couldn’t help wince when I heard the interview and if there was ever someone in need of both guidance, and subsequently advice, then it was certainly him.

To my mind, this type of educational and informational process around what to do with one’s pension, cannot start soon enough. At the moment it does feel like offering guidance through Pension Wise could start much earlier than 55 years-old when the individual concerned can now access their pension. For those who have regularly sought and secured advice throughout their lives, the issue might not be so imperative, but for those whose first introduction to guidance/advice will be Pension Wise I’m not so sure that we should be leaving it this late.

This is because when presented with an opportunity to draw down even some of their pension cash early, I’m not so sure that most of those without the history of advice-taking, won’t just jump at the chance in a ‘damn the consequences’ approach. Indeed, they may not have any idea that the consequences even exist, let alone can be so severe for those who get it wrong.

The media firestorm around Pension Wise continues to burn and there is often criticism of the perception of a low take-up however I’m of the opinion that you can take a horse to water but you can’t make it drink. That being the case, perhaps an earlier introduction to the service and the options, some years before they could potentially access their pensions, would make the individuals concerned much more thirsty when the drinking option is presented for real.

Also, as has already been pointed out, communication has to figure large on Pension Wise not just in passing but with a full focus on it. Some providers appear to be paying lip-service to its existence and, again if customers don’t have this information, then how can it be their first port of call rather than the provider themselves?

All in all, we do have the ability here to present the options, and the benefit of such options, clearly, precisely and in plenty of time. Perhaps we should not be waiting until the individual is 55 years old and they have already made their mind up; if we can present to them far earlier we have a better chance of moving them towards guidance and advice, and hopefully having them using this information and support to ultimately make the right decision.

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