The Financial Services Authority is consulting on whether pension providers should implement stronger ‘nudges’ to encourage savers to make an appointment with Pension Wise.
Pension Wise is a free guidance service providing help on a range of retirement related issues.
Launching the consultation the FCA said: “We want to create an environment where consumers are encouraged to take the right guidance at the right time to support them to make informed decisions.”
In the consultation document the FCA points out that Parliament has specifically voted against an amendment to the Pensions Schemes Act, which would have required an appointment to be mandatory.
One of the proposals under consultation is whether theres should be a cooling off period, if the saver decides to opt out of pension guidance. This would introduce a delay before they could access their retirement savings. This would reverse the current situation where declining a Pension Wise appointment is the quickest way to access pension savings.
The FCA is also asking whether provider should deliver an additional nudge to Pension Wise guidance earlier in the consumer journey than is required by the Pension Schemes Act.
The FCA adds it is looking at a range of optionswelcomes further suggestions from the industry as to what ‘nudges’ might be more meaningful and result in more people utilising the Pension Wise service.
These consultation documents though has been met with a mixed reaction from the industry.
Aegon pensions director Steven Cameron says: “The pension freedoms have given people huge choice around when and how to take retirement income.
“Ideally, individuals would seek professional financial advice on such an important decision which could impact their financial position throughout retirement. For those who are unwilling to do so, or feel the costs are prohibitive, guidance is a very valuable fall back and Pension Wise is free to those approaching retirement, as it’s funded by the industry.
“We support measures to strengthen the encouragement or ‘nudges’ to make a Pension Wise appointment so as many as possible use their valuable service, which can also help protect them against falling foul of pension scams.”
He stressed through that this should remain voluntary. “Going further and making an appointment compulsory would effectively bar individuals from accessing their own pension funds. Alongside Pension Wise, it’s important that pension providers can also offer individuals a range of guidance services personalised to their needs throughout their pension journey.”
However Stephen Lowe, group communications directors at retirement specialist Just Group implementing a stronger nudge to pensions guidance was unlikely to lead to more people using the Pension Wise service.
He described the proposals as a “plan set up to fail” and called for more radical change.
Lowe says: “With the three-year anniversary of the Financial Guidance and Claims Act less than a week away, the FCA has been compelled to take some action to implement its responsibilities although it knows the evidence shows the ‘stronger nudge’ will only deliver a marginal change in Pension Wise use.
“This is a plan set up to fail, which is acknowledged by the fact this consultation is appealing for more ideas to increase guidance usage, particularly earlier in the retirement journey when people are still making up their minds.
“The Government has set an ambitious objective for the regulator but has also effectively tied its hands by refusing to let it consider genuinely transformational measures such as automatic enrolment into pension guidance sessions from age 50. Our own research found that fewer than 4 per cent – one in 25 people – aged 45-54 with defined contribution pensions would opt out of a guidance session that has been booked for them.”