The chief executive of pension consolidator PensionBee has criticised the Money and Pension Service’s investment pathway comparison tool for leaving out ‘major providers’. In a letter to Maps chief executive Caroline Siarkiewicz, Romi Savova raised issues with the service’s investment pathways comparison tool claiming it was “highly misleading” and “not fit for purpose”. The government guidance site aims to help non-advised clients choose an investment pathway and choose which product would be best suited to their needs. Investment pathways were launched last month after the Financial Conduct Authority became increasingly concerned about non-advised retirees “sleepwalking” into having their money invested in very low-return cash funds. But Savova raised issues with the way products were compared in the tool, saying Maps displayed “incomparable products side by side in a way that suggests they should be compared”. The fear is that as it is difficult to rank incomparable products by anything but charges, the decision to obfuscate other important features could be extremely damaging for consumers. This issue was illustrated most starkly in pathway three – which is equivalent to drawdown. Some providers, such as Pensionbee, AJ Bell and Hargreaves Lansdown, took a “target returns” approach to this pathway, aiming to generate a predictable income. But other providers took an “asset allocation approach”, increasing the exposure to bonds and with no target return. Experts believe there is a similar issue with pathway four, which is aimed at those savers who wish to take all their cash within the next five years. Here, some providers have suggested consumers should avoid investing altogether, keeping their money in cash instead. The cost of this is presented as £0, but of course the real returns of this product are most likely to be negative owing to inflation.

Please Note: Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of March 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.