Purdah rules, which prevent the government from broadcasting marketing messages in the run-up to the general election, may have decided the fate of the government’s Pension Wise service, writes Andrea Rozario, chief corporate officer, Bower Retirement Services.
Following the Conservative’s shock majority victory, the dust will begin to settle and Cameron and his merry men (and a few more women) will begin to govern, this time without Clegg and co. The ‘grey vote’ has traditionally been won by the Conservative Party, and this demographic certainly had its part to play in their victory.
Pension freedom day (April 6) was, for many in the industry, the pre-show to the general election. But as talk is still dominated by the main event, it is easy to forget about the impact of the pension freedoms and the importance of services like Pension Wise.
Nearly two months on from the Pension Wise service going live, there are still serious teething problems and the very nature of the service is being questioned by some. What’s more, those in the equity release industry are becoming concerned that the Pension Wise service, although comprehensive in other areas, is ignoring the importance of housing wealth and thus not giving the complete picture that retirees deserve.
Other than the crash that followed the financial crisis, the past two decades have been boom years for the housing market. House prices have recovered swiftly over the last few years and average asking prices hit an all-time high this April of £286,133.
Most retirees will only have a pension pot of around £30,000 but potentially own a property worth over £250,000. It is, therefore, rather bemusing that housing wealth is consistently ignored when discussions of retirement financing arise. Pension Wise would seem to present the perfect opportunity to give those who are confused about how to afford retirement the overview that they need, and indeed deserve.
Other than the obvious problem that Pension Wise appears not to include explicit discussions about housing wealth, the issue of retirees bypassing the service is undermining the credibility of the project.
Despite some favourable reports about the guidance sessions, the simple fact is that the sessions are guidance and not advice. It is not surprising that thousands of people are bypassing Pension Wise altogether as most people do want professional advice, not just guidance.
Reports in the weeks that followed Pension Freedom Day revealed that some large pension providers were fielding as many as 3,000 calls per day, and Scottish Widows had to hire an extra 400 staff. Because Pension Wise is new and different and does not provide the advice savers need, this has deterred many pension savers. Guidance is all well and good but the entire service is at risk of performing a pointless middle-man role.
Savers are also going straight to their providers because they are unaware, from no fault of their own, of the Pension Wise service. Purdah, rules which ban marketing on government campaigns in the weeks leading up to a general election, has meant that many people may have never even heard of Pension Wise. Financial services group Sanlam has estimated that as little as 20% of over 55s will actually access the Pension Wise service.
The good intentions of the Pension Wise service have, unfortunately, been overwhelmed by the timing of the roll-out just before the general election. Now that Purdah rules have been lifted and the new government has been formed, a wide-spread campaign to raise the profile of Pension Wise and review its contents, must be enacted. The guidance service will fail if the majority of people don’t know of its existence, and the good intentions will remain just that.