Pension freedoms lead to uncertainty in workplace

Jamie Clark, Business Development Manager at Scottish Life, discusses the need for advice in workplace pensions and who should provide it.

It’s almost certain that the pension freedoms announced by George Osborne will create more demand for advice as people wrestle with what to do with their pension pot at retirement. In general, the pensions wealthiest will probably be looked after by their wealth manager and those with small pots will probably simply access the cash. But there will be a considerable chunk of people in the middle who can take full advantage of all the nuances of the pension freedoms but won’t necessarily understand the need for advice.

At the recent Corporate Adviser summit, we wanted to understand how advice could be delivered in workplace pension schemes to these people in the middle, so we asked the delegates that very question.

The role of the provider

Some thought that the pension scheme provider could offer advice through a part-owned advice fi rm. Others that providers should have their own bank of advisers that could be used when needed. The problem from our perspective with providers offering advice is simply that of impartiality. Just as happened with annuity sales, there is a danger that providers could be accused of (mis)selling their own products to the detriment of the consumer.

The role of the employer

Employers were seen by many as the obvious conduit to provide information and guidance in the workplace. Education and enablement through the use of technology was mooted as a low cost effective solution that both workers and their employer would value. As well as talking about pensions, the use of technology can offer information on health benefits, corporate discounts and even link to worker life events. All designed to engage workers in their workplace benefits throughout their working life. The goal would be that when the worker wants to access their pension pot, they will be fully engaged and understand if, why and how advice should be sought and how this differs from guidance.

The role of the corporate adviser

Adviser fi rms themselves could of course provide an advice service to workers. However many firms in the corporate advice space only provide advice to the employer or the pensions wealthiest within the employer’s business. Others will have the facility to hand off advice to another part of their business or another adviser firm altogether. Whether this picture changes will largely depend on whether the business feels that it is something they can offer on a commercially viable basis. 

In summary

In our discussions with the delegates at the corporate adviser summit, one thing was perfectly clear – there is a need for advice in workplace pensions and the new pension freedoms will drive that need further. What isn’t clear at the moment however is when and how this advice can be delivered so that workers make the most of their pensions pots. We’ll be speaking to Government and the ABI about this over the coming months to aim for the best result for workers, employers, and their advisers.

• Many people will be able to take advantage of the new pensions freedoms but may not understand the need for advice.

• The provider could provide advice but it might not be considered impartial.

• Employers were seen by many as the obvious channel for pensions information and guidance.

• Adviser firms could provide advice if the business feels it’s commercially viable to do so.

• There is a need for advice in workplace pensions and the new pensions freedoms will drive that need further.

Jamie Clark
Business Development Manager
Scottish Life