Guidance guarantee will lack impact if consumers lack trust, says Jelf Employee Benefits
Wednesday 18 June 2014
Jelf Employee Benefits points to research from a recent Which? survey* to demonstrate that the guidance guarantee is unlikely to have a meaningful impact if consumers don’t value the source of the guidance. The survey shows that 65% of people would not trust pension providers to offer new impartial guidance to help them decide what to do with their retirement pot.
Lee Coles, head of money after work for Jelf Employee Benefits, says: “We have to ask the question ‘if insurers had offered better value for every person retiring, by conducting a robust whole-of-market annuity search, would the Government have deemed this radical pension freedom shake up necessary?’ We believe that the proposed new freedom is a good thing, but the positives are accompanied by a significant increase in the potential for poor outcomes. A guidance guarantee can only go so far, and we don’t think it’s far enough.”
Jelf cites the strong temptation to access pension savings early, for purposes other than funding retirement, as a case in point. Will members of the public trust pension providers who have a vested interest in keeping money on the books? Even an independent body may struggle to influence someone who, for example, has just decided to use their pension savings to buy a new car at 55.
Coles goes onto say: “The Which? results confirm what we know: consumers trust people with whom they have a relationship. We have long held the view that preparing for life after work starts years before a proposed retirement date. Retirement planning isn’t about a single conversation or transaction.”
To secure the best outcomes for themselves, consumers will need to trust any guidance they are given. That trust will need to be fostered through a relationship, and this means taking time to understand an individual’s aims and helping them to realise those aims.
“Given the increased choice, people will want advice and they will ideally want it from a reliable source they already trust. This isn’t about a product sell, it’s about getting to know the individual and understanding their objectives. We offer career-long guidance, through workshops and individual clinics. We are building relationships with people years before their retirement date so they have a strong sense of what good and bad outcomes look like, well before the point at which they take their benefits. We appreciate this is best practice rather than a mass-market solution, but would you want to do this any other way? Ultimately we’re flexible in how we work with our clients, and we believe this is the only way to really build trust.”
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Key findings in the Which? survey
- Which? surveyed more than 1,000 of its members, made up of both people who have retired and those who are still working.
- Of those surveyed who are not yet retired, three-quarters (76%) feel they will need advice about what to do with their pension when they retire.
- Which? is calling for the guidance to be given independently, via telephone, online or face-to-face, and for pension providers and insurers to be excluded from giving this information.