The chair of the Work and Pensions Committee has submitted an amendment to the Pension Schemes Bill, which, if passed, will see people automatically enrolled to Pension Wise guidance before accessing their DC pots.
The amendment, submitted by Stephen Timms will be heard at the bill committee on Tuesday.
It follows a statement by the Department of Work and Pensions last Thursday which proposed ‘nudge’ measures to encourage more DC scheme members to access guidance via Pension Wise. However this stopped short of automatically referring them to this government-backed guidance service.
Explaining his decision to propose this amendment Timms says: “The new clause would ensure member or survivors of pensions schemes receive an impartial guidance appointment prior to the point when they become eligible to access their pension benefits, with an appointment booked each year until such time that the member has received impartial guidance.”
He added: “If members or survivors of pension schemes have not used pensions guidance by the time they become eligible to access their pension, they will be directed to pensions guidance by the regulations from the Financial Guidance & Claims Act upon requesting access to their benefits.”
Following the DWP proposals released last week Timms added: “Pension Wise offers a hugely valuable service for the pension savers who use it: nearly three quarters of them make a different decision after having its guidance.
“But unfortunately only a very small proportion of savers speak to Pension Wise. That leaves huge numbers of people at risk of making the wrong decision about accessing their pension savings—risking a lower quality of life in retirement and, in the worst case scenario, losing all of their pension savings to scammers.
“The approach the Government has outlined is a step forward. But even on its own evidence, though, it seems unlikely to deliver a really major increase in the numbers of people who take guidance from Pension Wise.”
The DWP nudge proposals, published last week, follow a trial which demonstrated a “significant increase” in the number of savers accessing a Pension Wise appointment when providers explained the nature and purpose of the guidance, and then either offer to book a Pension Wise appointment, or transferred them to the Money and Pensions Service who booked the appointment.
Speaking last week the minister for pensions and financial inclusion Guy Opperman 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.
“As well as encouraging people to use the service, the proposals will help protect consumers from scams.”