We are delighted at the news from government this weekend that from 2018 there will be a single public financial guidance body covering money and pensions guidance and debt advice. We, along with many others (the Financial Inclusion Commission, debt advice and money guidance agencies), have long been recommending this holistic approach, so it’s reassuring that government ministers are listening to the sector about how best to help people build lifelong financial health and resilience.
What’s going to change?
Currently the Money Advice Service is responsible for money guidance and debt advice, while pensions advice is provided by the Pensions Advisory Service (TPAS) and Pension Wise. The rationale for the split was that the market is best placed to provide most financial guidance, so the government just needs to plug any gaps through commissioning (e.g. debt advice). But because pensions are both particularly important and complicated and people therefore usually need specialist advice to understand how pensions products work, government should provide this advice directly. This led to a decision earlier this year to replace the existing bodies with two new ones; one to oversee general money guidance and commission debt advice, and another to provide direct pensions advice. But this week the government has announced that – having reflected on the sector’s feedback – it will now replace all existing provision with one single body covering debt advice, money and pensions guidance.
Why do we need a single financial guidance body?
Pensions are simply one aspect of our lifetime finances; when we make any decisions about our money pre-retirement, that has a direct knock-on impact on the money available to us in our retirement. Separating out pensions as a “specialist” subject divorced from our day-to-day money management increases the risk that we ignore our retirement needs until it’s too late, and so we miss the opportunity to engage as fully and actively as early as possible. And the later we engage with our pension planning, the less money we will likely have in retirement. It’s simply impossible to talk about saving for a pension and not talk about someone’s current financial circumstances; and it’s a wasted opportunity to help someone with their finances today without supporting them to plan for later life. So we believe that it’s crucial to integrate pensions into wider financial guidance provision, and that the UK needs to take a lifetime approach to the oversight of financial guidance provision.
In other words, the separation between pensions and all other financial guidance has always been an artificial one based on the type of service provision (direct advice versus oversight) and lead government department. But if we are to meet the goals of the UK Financial Capability Strategy, we believe that the national money guidance body must be designed to meet people’s needs throughout their life, helping us understand how to maximise our financial health and resilience – and that of our families – from infancy to end of life. Crucially, ministers have recognised that, while pensions have a greater fiscal significance than consumers paying down debt or managing money day-to-day, in reality what people need is impartial and reliable support to make healthy, holistic decisions over their lifetime in all aspects of their finances. We believe that this approach is the key to increased engagement with pensions; only by engaging effectively with my money today can I make the right decisions for my future financial needs.
Financial health and resilience need human-centered policy – and product – design
Changing public policy decisions isn’t easy, so the Economic Secretary to the Treasury, Simon Kirby and Pensions Minister, Richard Harrington, are to be congratulated on listening to the sector, and on working together to put people’s needs at the heart of decision-making and policy design. We are excited at the current level of engagement by ministers in exploring what works, and welcome this new consultation process. Partners across the sector will be eagerly – and indeed anxiously – waiting for more details, so we encourage government to share information about the new process quickly and regularly.
But we also hope that ministers will go further, ensuring that people’s needs are consistently put at the heart of the design process to create a truly joined-up approach to creating financial resilience. Years of work in the sector has taught us that effective change is only possible when we work with people as they really are, not as we imagine them to be. It’s true that involving users in the design process in a genuinely collaborative way is challenging and time-consuming. But we have also seen how this human-centered design approach leads to better, more relevant and effective policies and practice that transform people’s livelihoods. We believe that putting collaborative and systemic design at the heart of this new financial guidance body would indeed be revolutionary – and help transform our collective understanding of making the UK more financially resilient. So we welcome this first step in the right direction and hope ministers will continue to rise to our challenge!