The year 2021 is one I’m looking forward to for a number of reasons.
An obvious place to start would be that 2020 has presented us all with challenges to our physical and mental health which, I hope, we can start to move on from as we enter the new year.
For the pensions geek in me, 2021 is exciting because it means I’ll pass one of those milestone birthdays – the one which means I’ll become eligible to book an appointment to talk with Pension Wise.
The October 2020 Pension Wise Evaluation Report published by the Money and Pensions Service (Maps) makes for interesting reading. Customer satisfaction with the outcomes of appointments is high, with 94% of customers who book an appointment rating themselves very or fairly satisfied with the appointment and 97% being very or fairly likely to recommend the service to others. Perhaps most telling is that 93% of Pension Wise’s appointment customers considered themselves to be very or fairly well informed of their pension options, compared with only 60% of non-Pension Wise users.
Encouragingly for advisers, nearly a quarter of those using Pension Wise did so to help them to be better prepared for a meeting with their adviser, and more than seven in 10 left their appointment saying they would pay for financial advice, if the costs were reasonable.
Given these positive outcomes, even though the number of individuals booking appointments each year has grown substantially since the service was launched, it isn’t surprising that many are looking at ways to encourage even more savers to make use of Pension Wise.
Providers and politicians have proposed measures ranging from pension administrators having to book appointments for customers at the point they look to access their benefits, to the Secretary of State for Pensions having to write to individuals five years before minimum pension age giving individuals a scheduled date and time for an appointment, or the option to reschedule or defer that appointment.
Perhaps most importantly, Maps itself ran a ‘Stronger Nudge’ project, which saw three providers participating in a study to encourage more of their customers to book an appointment with Pension Wise either when enquiring about their retirement options in the period before they elected to access them, or at the point of access itself.
An interesting outcome of the study, though it is only obliquely referred to within the published findings, was that the Stronger Nudge was far more effective when delivered prior to the point of access than at the point of access itself.
Both the Department for Work and Pensions and the Financial Conduct Authority are now working on initiatives to improve the number of individuals booking appointments. I’ll certainly try and do my bit to help the figures next year but, wide of my efforts, regulators would do well to take lessons from the Maps finding that nudges will have far greater impact when delivered prior to access.
That this would be the case is basic common sense really.
If a saver books an appointment with Pension Wise prior to contacting one or more of their pension providers about accessing benefits, the appointment has far more potential to influence how that individual chooses to take benefits than if the appointment takes place at point of access.
By the time an individual contacts a provider to take benefits, most will already have decided what they want to do. The correspondence with the provider is far more likely to be an instruction to pay, rather than a question about how payments can be made.
A more likely question at this stage will be “how quickly can you pay me my tax-free cash?”. Trying to persuade an individual to book an appointment with Pension Wise, potentially weeks later, at this point in time will be a fool’s errand.
More practical issues quickly become apparent when pre-booked point of access appointments are considered. For example:
- Providers won’t know when that access will take place – most individuals predominantly taking benefits at a retirement age selected years ago is a thing of the past.
- Savers will view an attempt to force them into an appointment only after they’ve already asked their provider to pay benefits to them as the provider trying to hang on to their money.
- Most individuals will have several different pensions – customers are going to be angry being pushed towards a pre-booked appointment when this is the eighth time it has happened!
- Many savers will only take a small part of a pension for a specific purpose – potentially not the best point to encourage broader consideration of their wider pensions needs.
The idea of the government proactively offering Pension Wise appointment to savers in the period between their 50th and 55th birthday, but with the individual having the opportunity to push this back to a more suitable date and time of their choosing (or to just say they don’t want the appointment) makes a lot of sense and fits nicely with provider wake-up communications.
Sadly, the transactional focus of savers at point of access means that it is never going to be the most effective time to try to push Pension Wise appointments.
Gareth James is head of technical at AJ Bell