Natasha Browne looks at how The Pensions Advisory Service plans to deliver the guidance guarantee.
Chancellor George Osborne blew the industry away when he promised every pension saver would get free face-to-face advice at retirement in the Budget 2014. That advice quickly turned to guidance and The Pensions Advisory Service (TPAS) and the Money Advice Service (MAS) were subsequently tasked with delivering it.
The government-backed organisations have faced questions over whether they have the scale and resources to provide the guidance. Pensions Administration Standards Association (PASA) chairman Margaret Snowdon previously raised concern that TPAS and MAS did not have the capacity to manage the expected demand (PP Online, 22 July).
TPAS chief executive Michelle Cracknell has assured the industry it has the resources to meet the challenge. In a panel debate last week, she said: "We've done modelling about the amount of sessions we're going to do and we're also feeling confident that there are enough pensions specialists that we can get on board. I have sitting on my desk a whole heap of CVs that I've received proactively that people have sent me that want to get involved in delivering guidance."
Cracknell was worried about timescales, however. She said: "We need to recruit and have time to train people adequately because we take it as a given that they have the knowledge but we do train them in having the skills to become a guider."
Her greater concern was that not enough people would take up the guidance guarantee. This sentiment was echoed by Prudential retirement income specialist Vince Smith-Hughes. He said: "Let's hope we get a lot of people taking up the guidance. Those conversations with people will point them in the direction of actually ‘yes, either I want to take my fund, or I want to buy an annuity, or I want to do drawdown'. Or much more likely than that, ‘I'm not so sure, perhaps I should go and see an adviser'. It won't direct them but it will inform them to help them make that decision."
A lot of discussion on the guidance guarantee has centred on whether it will make individuals sufficiently aware of their options and the tax implications of their decisions. Smith-Hughes pointed out that without guidance, there is another hidden risk. He said: "There is a possible danger that people do cash their chips in and their pension and then they go and put it in their bank account. What have they done there? They've actually taken it out of a tax-efficient environment into a taxed environment." He added: "It all comes back to the fact we really need to make people as educated as they possibly can be on this whole issue of what to do with their pension funds."
The five stages
TPAS has proposed a five stage process for the guidance guarantee to the Treasury. The first step would be a call to action to get savers to take it up. Cracknell said: "The warm up pack is too big at the moment; it needs to be a much stronger message and not lost in long communication. We've said it should be short and snappy and very clear that people should be encouraged to take it."
The second stage would see individuals being sent an appointment for their guidance session. Cracknell added: "There are operational reasons for that, but more importantly we would encourage people to prepare for the session."
This leads neatly into a third stage - preparation. The chief executive continued: "People are then told ‘you've got an appointment on this date. Before the appointment these are the things that you should do'. If people don't do them, and let's face it a lot of them won't, they still have the guidance session. It's just that the more they do, the richer the guidance session will be."
The fourth part would be the conversation, to be made up of ‘content blocks'. Cracknell said: "We do talk about personal issues, we do talk about what people have got - their resources - and we do talk about their options and where they should go next. We don't always do it in the same order." TPAS receives calls from a vast range of people, including those with a lot of knowledge. Cracknell explained that no matter how informed the caller seemed to be about their options, TPAS would always try to apply it to their individual circumstances. She said: "We'll always try to bring the conversation back to the personal issues; are you retiring? How big is your pot? We are then able to say whether a conversation about flexible drawdown, for example, is relevant to them."
Finally, the fifth stage would be the production of personalised written information. Cracknell explained: "We would like to see that output document handing back the baton and the responsibility to the customer, but also to be the interface with the rest of the industry. So if they're getting advice we would love to have an output document where advisers say ‘that's good, I've got a good starting point here from your first conversation, now let's build on that'."
Qualified pension specialists will be used by TPAS to provide the guidance. They will need between five and ten years of experience depending on the breadth of the area they are focused on. Around two-thirds of its current helpline staff have Pensions Management Institute (PMI) qualifications. Another third have qualifications from the Chartered Insurance Institution (CII). The service did dispute mediation and guidance for a budget of £3.4m last year when it dealt with 80,000 customers. It will stick to phones and webchats for the guidance guarantee. Cracknell said: "We don't deliver face-to-face because it's too expensive. That's the Treasury's decision if it wants to deliver it face-to-face."
All partners involved in the guidance guarantee, including TPAS and MAS, will come under a single national brand. Cracknell said: "You'll get the trigger from your workplace consultant saying the phone this number for the National Guidance Service or whatever it's called. And then if you phone, you'll speak to us we hope. The appointment booking will be through a central function and then there will be partners to do each of the deliveries underneath it."
The Financial Conduct Authority's (FCA) consultation on the guidance guarantee closes on 22 September.
The British Medical Association (BMA) has warned chancellor Philip Hammond to reform the NHS pension scheme rules or doctors will reduce their working hours.
The lifetime allowance should be scrapped and replaced with a lower annual allowance, last week's Pensions Buzz respondents said.
Action for Children Pension Fund has outsourced its pensions administration to Trafalgar House.