Speaking at a Personal Finance Society conference with the theme ‘A Vision for Financial Planning’, Groves was responding to pensions minister Baroness Ros Altmann, who appeared in the form of pre-recorded videos despite originally being scheduled to speak at the conference.
Altmann said: “I am hoping that whilst people are encouraged to use Pension Wise, and of course we need to encourage more people to do that, then they will better appreciate the value of paying for independent financial advice to help them make the right decisions.”
But Groves said: “[I] have some concerns about the argument that giving people free guidance will encourage them to value advice.
“I’m not entirely sure that the way to explain to people that something is really valuable is giving it to them for free.”
He added: “It appears that the average pension pot of a guidance user is nearly £100,000.
“I don’t think that is the target audience when Pensions Wise was established, so at the moment Pensions Wise is used by frankly clients who are probably IFA clients getting a free second opinion.
“I think there is a missed opportunity here. There was a strong case for giving people a voucher to see an adviser and I think you could see more people more cheaply and with the full protection regulated financial advice would have given.”
Altmann declared Pensions Wise a success, which seemed to irritate Groves. While he said the scheme was better than nothing to accompany the freedoms, he added that the scheme’s success should be measured in 25 to 30 years’ time.
The government hasn't been transparent about the cost or aims of the scheme, which as he pointed out makes evaluating its success difficult. He reckoned pension freedoms were devised primarily to raise tax revenue rather than for the good of the public.
He said: “It is way too early to call a success of this initiative.
“I’m not sure if I’m honest [whether it has been a success]. If you think that people spending their savings is good then clearly it’s been a success.
“It’s interesting that the government never defined what success would look like before it made the changes.”
Groves ended his speech by making a number of predictions. He foresaw the FCA allowing an “automated web-solution” for advice, he reckoned there will be misbuying scandals in the years ahead and he warned that some people will come unstuck due to the freedoms – with those who don’t take out advice being in danger.
He said: “Clients without advisers will struggle in this world.
“Many will overspend by thinking they’ll live for 10 to 15 years when they live to 30, some will be petrified of spending money and will live in poverty and die with all their assets as well.
“Only the lucky will survive.”
Groves expected pension freedoms to eventually be reined in once the penny drops that giving people access to their pension pots is risky. He added: “I think it will be viewed that they have gone too far and they will be reeled back in.”
