Not so wise

The great pension revolution has not been without its snags and hiccups.

The concern that savers would pillage their pension pots in droves and blow all of their savings, thus worsening the burden on the state to financially provide for the elderly, was quickly put to bed by the former Minister for Pensions, Steve Webb.

Webb said the government was 'less bothered' about what people will end up doing with their money, and was more concerned with actually ensuring that savers are able to do with their money as they please.

'So actually', he said, 'if people do get a Lamborghini and end up on the state pension, the state is much less concerned about that, and that is their choice'.

Fair enough.

There was never any real danger that the average saver would be able to blow their savings on that feted Italian sports car anyway. The average pension is worth between £17-£30,000, but that is still a considerable sum of money that can be frittered away in an endless number of unwise ways.

In order to give savers at least some measure of guidance, surely the government, having lifted the lid on pension pots, would put into place an advisory system of some sort? Enter Pension Wise.

Pension Wise is billed as the 'free and impartial government service about your defined contribution pension options'. The only problem with this guidance service is that those who have a pension don't seem to know it exists.

In the first three months since freedoms came into force on 6 April 2015, of the 200,000 people who accessed their pensions, only 20,000 received guidance from Pension Wise.

The service is expected to cost £35m this year alone (a levy on financial services firms will contribute £4.2m). It has been so underused that Pension Wise staff who have not been booked are being redeployed to work for the Pensions Advisory Service instead - beats twiddling their thumbs, no doubt.

Cue the finger pointing. Steve Webb has complained that the money spent on the service 'should have been spent on £500 advice vouchers' instead, more or less calling it unfit for purpose.

Ros Altmann, the current pensions minister, has laid the blame at the door of pension scheme providers, whom she has accused of driving savers to their own advisory services at the expense of Pension Wise. Matthew Phillips, director of Thomas Miller Investment, in response to that accusation posed the question, how else are 'commercial enterprises with shareholder responsibilities' expected to conduct themselves?

Unfortunately for the government, the more Pension Wise is scrutinised, the more unwise the whole thing begins to look. Let's hope that whatever measures are taken to replace or fix it aren't rushed through like a Friday afternoon car, but are thought through in a way someone investing their pension pot ought to.

Binyamin Ali is the editor of Private Client Adviser