Pension reforms finance experts warn of lack of advisors to guide public

The launch of the Government’s landmark pension reforms has been dubbed “shambolic” after it emerged they have yet to finalise the financial advice safety net designed to protect pensioners.

From April 6, over-55s will be able to access their pensions cash early under changes announced in last year’s Budget.

But despite having unveiled a logo for the Pensions Wise scheme offering advice to pensioners on what to do with their money, the Government is unable to say exactly how many advisors there will be or how they will be spread across the UK.

The Sunday Post has been told by industry sources that Scotland could get just 25 advisors and concerns have been raised about the level of training they will be given.

Tom McPhail, head of pensions research at City firm Hargreaves Lansdowne, said: “We are just eight weeks away from kick-off. There’s a risk that the whole thing is going to unravel.”

Chancellor George Osborne announced the moves to allow people with defined contribution schemes to draw down their money rather than having to buy an annuity that guaranteed an income for life last March.

The changes come into force just 12 months later on April 6.

McPhail compares that timescale to the auto-enrolment reforms forcing employees into workplace pension schemes.

Added McPhail: “This timetable owes everything to politics. There’s a clear analogy with auto-enrolment. That was a revolution in getting people in to pension schemes, this is a revolution in getting people out. But auto-enrolment began with the pension commission in 2004 and won’t be fully up and running until 2016.

“If the Coalition was not fighting tooth and nail for every seat they would have taken a lot longer over this.”

When Osborne unveiled the changes last year, they were widely praised but even then concerns were raised about making sure people made informed decisions and whether the Government was going to offer guidance or more rigorous financial advice.

Normally sure-footed Pensions Minister Steve Webb was criticised for saying he was “relaxed” about the prospect of pensioners blowing decades of savings on a Lamborghini.

In October, the Government said savers would be entitled to a free 45-minute advice session online, on the phone or at their local Citizens Advice Bureau (CAB) office.

In response to Labour questions, Treasury minister Andrea Leadsom announced there will be: “Around 300 trained guidance specialists working to deliver the Pension Wise service face-to-face and over the phone across the UK.”

However, only 44 of 316 Citizens Advice offices in England and Wales are to have a Pensions Wise advisor on hand.

Pensioners in a big city such as Bristol face an hour’s drive to the CAB office in Taunton if they want an appointment.

In Scotland the situation is worse, with Citizens Advice Scotland currently unable to say how many advisers it will be deploying or where they will be based.

The Sunday Post has been led to believe there may be as few as 25 experts on hand to deal with inquiries from thousands of Scots pensioners who will be eligible to access their pension pots.

Citizens Advice Scotland say they will unveil their plans in the next few weeks but the clock is ticking towards the launch of the new arrangements.

Labour’s shadow Treasury minister Cathy Jamieson said: “This is yet further evidence of the inadequate preparations by Government ahead of the introduction of the new pension freedoms in two months’ time.

“On April 6, thousands of savers in Scotland will be looking for information and guidance on what to do with their pensions. It is essential that it is available to them, as the Government promised it would be. However, the closer we get, the more shambolic the Government’s preparations look. I am particularly concerned that the Government still cannot tell me how many of the guidance providers will be located in Scotland.”

It’s estimated around 300,000 savers will be looking to take advantage of the new rules every year with a rush in the spring when the changes are first implemented. Annuity sales have dipped since the last Budget, with tens of thousands of people waiting for April to get their pensions in order under the new more flexible regime.

Nigel Green, head of the world’s largest independent financial advice company, the DeVere group, added: “There are concerns that Pension Wise, the Government-backed guidance service that aims to educate savers on the changes and their impact, will not be properly staffed by the launch on 6th April.

“Plus there’s the concept of the service itself. A ‘one-size-fits-all’ approach to something as important as an individual’s retirement income could result in a host of serious, unintended consequences.”

According to McPhail, Citizens Advice has been recruiting advisors by offering them a starting salary of just £18,000 and not requiring hires to have any experience in the pensions field.

Just how tricky negotiating the pensions minefield will become was illustrated last week when the Government finally got a copycat website that looked like the official Pensions Wise page shut down.

The official website is gov.uk/pensionwise.

One surefire side-effect of the reforms will be more nuisance calls and spam texts from dodgy firms trying to con pensioners out of their savings.

Added Mr McPhail: “It’ll be open season and these characters won’t even have to break the rules. They’ll just bombard over-55s with phone calls and texts offering them the chance to get rich with spurious schemes.

“Some people will be seduced by these schemes and some people are going to lose everything.”

Labour’s Cathy Jamieson, MP for Kilmarnock & Loudoun, added: “We have been warning for months about the dangers posed to consumers by scams and mis-selling but the Government has done nothing.

And she went on: “They haven’t thought things through and we are beginning to see the consequences.”