A third of employers are in the dark about the service that Pension Wise can provide, according to the latest research from UK merchant banking group Close Brothers Asset Management. When asked about their experience of the Government’s free service so far, 32% admitted they were not clear about how it could help.
This lack of clarity is worrying as the service grows in popularity. Following the Summer Budget, the Government took steps to increase access to Pension Wise by expanding it to the over 50s, and it is growing in popularity. More staff are turning to Pension Wise (19 percent) than to financial advisers (17 percent) or their employer (18 percent) for clarity about how the recent pensions reforms will affect them.
However, despite its popularity, more than one in eight employers (or 13 percent) said they did not feel confident recommending Pension Wise to their staff for guidance. On the other hand, nine percent have found it a huge support in offering help to their employees.
Close Brothers Asset Management’s latest Business Barometer survey, which questioned nearly 700 employers, discovered 29 percent of employers do not know who their staff are speaking to at all when it comes to asking about the pension reforms, while nine percent suggested advice was coming from family and friends.
On a more positive note, over a third (37 percent) said the pension reforms had encouraged them to play a greater role in financially educating their employees. Despite this, 23 percent admitted they did not have the right provision in place to sufficiently support staff. The smallest businesses, with turnover of under £500,000, are naturally the ones struggling the most with this, as 31 percent felt they did not have the right resource in place, compared to 18 percent for the largest companies (with turnover of over £10 million). Promisingly, one in five businesses said they were actively trying to improve their support network for staff approaching retirement.
“Four months after the pension reforms were introduced, it’s clear that there is still some confusion,” says Jeanette Makings, head of financial education services at Close Brothers Asset Management. “It’s crucial that if employers are directing their staff towards Pension Wise, they really understand the support it can provide and that the guidance it gives is not advice and so should sit alongside financial advice rather than competing with it. While it’s a positive that Pension Wise was extended, raising awareness of the service and the need to plan for retirement earlier, the lack of clarity around its purpose – and limitations – indicates that it’s not being used to its full potential.
“Directing staff to Pension Wise should not be the sum of total support that employers provide to guide staff. Options at retirement have become all the more complex, and education is the key to helping employees navigate their new freedoms. A financial education programme – whether this is through seminars, clinics or one-to-one advice, can help to build up understanding and engagement and can lead to them taking action to improve their financial wellbeing. Employers are a vital cog in helping staff make informed decisions about their future, and both will be better off in the long-term should this be a success.”