The Government has issued plans which would require pension providers to “nudge” savers to seek guidance from Pension Wise.
According to new Government plans, pension providers will be required to “nudge” savers towards Pension Wise, a free and impartial guidance service that has been set up by the Government, before savers can access their funds.
These plans come after a series of successful trials which saw a significant increase in the number of savers accessing a Pension Wise appointment after pension providers explained the nature and purpose of the guidance. These providers also then either offered to book the savers an appointment with Pension Wise or referred the savers to the Money and Pensions service who booked the appointment.
The Government have stated that their following Statement of Policy Intent wants to “build on these promising results” and “encourage more people who would benefit from Pension Wise, but who otherwise wouldn’t have made an appointment, to do so.”
These proposals are also intended to protect savers from scams.
According to Government figures, demand for the Pension Wise service has grown year-on-year since it was launched in 2015. In a Pension Wise Survey Evaluation, which took place over 2019-2020, over 94 per cent of all appointment customers said they were very or fairly satisfied with the service offered. This was also the case for 94 per cent of face-to-face customers, 94 per cent of telephone customers and 82 per cent of self-serve web customers.
Additionally, in 2019/2020, this report shows that the Money and Pensions Service delivered over 200,000 Pension Wise interactions – more than triple the number that was delivered in 2015 when the service first launched.
Guy Opperman, Minister for Pensions and Financial Inclusion, said:
I want taking guidance to become a natural part of the journey savers embark on when making decisions about their pension pots.
These measures will advance the Government’s goal of ensuring that people have the necessary support and information to make informed choices about their financial futures.
However, some have suggested that this does not go far enough. James Lindley, Pensions Advisor and founder of Castell Wealth Management, a financial advisory firm, said:
Any steps to help educate savers is, on the face of it, a good thing. However, with the complexities attached to retirement, savers will often find guidance insufficient. This, compounded with increasing numbers of people accessing pensions and fewer people taking regulated advice, could lead to hundreds of thousands of savers making ill-informed decisions that could be avoided.
The problems with the most recent proposals is that there is no tangible way of reviewing the success of Parliament’s decision, aside from seeing an increase in the number of appointments made through Pension Wise. Unfortunately this does not go as far as it should do to ensuring positive outcomes are achieved by savers.
In my opinion what those accessing retirement benefits actually need is twofold. Firstly, a clear breakdown of the difference between guidance and advice, and secondly the requirement for regulated financial advice where there are complicated issues at play. There should also be a focus on savers in the accumulation stage of their lives. With the average pension in the UK standing at £50,000 and with only 9% of UK savers taking advice, there will be huge shortfalls for those retiring in the future.
Monica Sharma is an English Literature graduate from the University of Warwick. As Editor for HRreview, her particular interests in HR include issues concerning diversity, employment law and wellbeing in the workplace. Alongside this, she has written for student publications in both England and Canada. Monica has also presented her academic work concerning the relationship between legal systems, sexual harassment and racism at a university conference at the University of Western Ontario, Canada.