October pensions supplement: The advice problem

Visit the rickety offices of The Pension Advisory Service (TPAS) in Victoria and you’re in for a big surprise.

With only a smidgeon over £3m a year in funding from the Department for Work and Pensions, Michelle Cracknell and her team of 40 full time staff took 80,000 helpline enquiries last year. Together with 400 unpaid but highly qualified volunteers it managed over 2,000 cases brought to them by members of the public bemused and disgruntled by Britain’s complicated pension system.

TPAS, since Cracknell’s arrival as Chief Executive, is working. On the day I visited, every call handler was busy either on a landline or on one of the dedicated terminals talking screen-to-screen via web chat or dealing with the wall of online enquiries.

The people TPAS helps are often those individuals that financial advisors cannot or do not reach. TPAS sees spikes in demand whenever Martin Lewis, the founder of MoneySavingExpert.com, mentions their service and Cracknell points to high user satisfaction surveys as proof of running a highly professional helpline. Cracknell and her team have seen increases in volumes of customers due to the new media attention that has been put on pensions. She says that “this is what we dreamed of, people wanting to talk about pensions.”

But Cracknell admits she’s still playing “lower league football.” From April 2015, she hopes that TPAS will be promoted to the Premier League as it takes on the challenge of up to 300,000 new callers, all of whom will want to discuss what to do with their pension savings. This is down to a promise made by George Osborne in this year’s Budget. Having changed the tax rules so that people no longer needed to buy annuities, the new pension freedoms that have emerged are baffling to a pension buying public. The Office for Fair Trading has expressed concerns over the ability of customers to make good decisions in their choice of pension.

Osborne, anticipating the issue, simultaneously announced the launch of a universal right for those reaching retirement to receive guidance, delivered either over the phone or in a face-to-face meeting.

The announcement was long on ambition—but short on detail. “Getting people to these guidance sessions is going to be hard work,” says Cracknell. “Our telephone and web service is an efficient and easy alternative for those pressed for time or far from the beaten track.”

Cracknell is confident that she can scale up and that her service will be able to cope with the weight of demand that will fall on it in 2015. Finding more floor-space and terminals for her employees to use will be one thing—but finding adequate numbers of people who are trained to give advice is another. Cracknell aims to tap into an under-used talent pool of pension experts, who have not only the expertise but also the desire and aptitude to help the general public.

The government aren’t just looking to the phone and the computer. Steve Webb, the Minister of State for Pensions, spent the summer promoting the idea of events where those who want to access expertise can do so at “Question Time”-syle sessions. This approach will go some way to reducing the need for one-to-one sessions for some of the 300,000 pensioners who will come looking for advice in 2015. But it will not be a replacement. A large number of one-to-one meetings will still be required.

TPAS will not be able to manage the entire advice project. Charlotte Clark, Director of Private Pensions at the Department for Work and Pensions and, until recently, a senior member of the Treasury’s pension team, doubts that TPAS can extend its scope to providing this face-to-face service. Clark has just put forward a DWP team to bolster the Treasury’s resources and to help with the provision of advice.

Smart readers will have recognised a political dimension here. With four million voters already auto-enrolled and six million to follow by 2018, pensions look like a political hot potato. Start debating changes to the state pension and pensions could, for the first time since William Beveridge, become of electoral significance.

George Osborne’s guidance guarantee is a political banana skin. TPAS is a plank in the government’s delivery strategy, which effectively makes Cracknell’s unit a barometer for the success of these reforms. What if it cannot take the strain?

The guidance guarantee will fall over if more than 25 per cent of retirees insist on a face-to-face meeting. That’s because there’s neither the money nor the people to deliver more than 75,000 individual sessions in a year. If demand exceeds that number, and there is a strong likelihood that it will, then the Pensions Advisory Service will need substantially more help from the Chancellor, if they are to fulfill the terms of his most generous guidance guarantee.