The report warns that "to not provide the basis for a well-informed choice could lead to the next major pensions mis-selling scandal” and admitted that take-up of Pension Wise services has been "lower than many anticipated".
The report desribes the Pension Wise website as "not fit for purpose", adding that fewer than one in ten people accessing their pots had a Pension Wise session. Such a low take-up has been desribed as a "concern" considering the service was created to fill a potentially dangerous anticipated gap in support for consumers.
It also suggested that a one-off 45 minute guidance session was "insufficien" and is calling for the Financial Advice Market Review to consider the case for offering two or more Pension Wise guidance sessions per customer.
The WPC has since recommended that the Government ensure the Pension Wise website provides an indicative income calculator, illustrative examples tailored to individual circumstances and a printable summary function as a matter of urgency. Additionally, it argues that the pension freedoms also add to the already strong case for a pensions dashboard, which would allow people to see all their pensions savings in one place.
The committee also argued that the government could do more and recommend greater anti-scam publicity and stricter reporting requirements for pension providers.
The report concluded that despite promising signs, the pension freedom market is "clearly not yet operating entirely as it should".
It said:
"For consumers, already daunting terrain is more difficult to navigate than it should be as there are gaps in the availability of support. In particular, provision in the middle ground between free guidance and traditional but expensive face-to-face independent financial advice is woefully inadequate. As long as this gap persists, consumers are at risk of making poor decisions with their life savings.
"To their credit, industry and regulators alike have identified the affordable advice gap as a problem. We heard impressive examples of innovative products and over time we expect the market to adapt to largely close the gap. The future of financial advice and guidance is clearly predominantly online and interactions will be increasingly focused on single transactions. The role for regulators is to enable innovation and market entry by adapting to these changed circumstances."
Tom McPhail, Head of Retirement Policy at Hargreaves Lansdown, said:
“The committee’s report highlights some important issues. It rightly focuses on the gap between free guidance and full regulated advice, highlighting the need to develop solutions to fill this gap. It also makes the important point that the tracking by public bodies of investor behaviour, decision making and outcomes has so far been inadequate.”
“The Committee advocates the expansion of public guidance services to fill the gap between advice and guidance as they currently exist. There is no evidence to justify this creeping nationalisation of the UK’s financial services. Take-up of Pension Wise has been very modest, whereas by comparison the pensions industry has in the main risen admirably to the challenge of the Pension Freedoms. The provision of tools, information, telephone and email support as well as shopping around services by the pensions industry dwarfs the efforts of Pension Wise.
“Hargreaves Lansdown recommends that before throwing more resources at the free guidance services, policymakers should explore the development of personalised guidance by the financial services industry as part of the FAMR and Guidance reviews. The development of minimum standards for non-advised product distribution presents a more realistic and cost-effective route to delivering good consumer outcomes.”
