The number of people seeking Pension Wise guidance prior to retirement has fallen year on year, despite government legislation to ‘nudge’ people towards this free assistance.
These stronger nudges were introduced two years ago. Initially this resulted in a 14 per cent increase in the number of people taking Pension Wise guidance as part of the process for applying to take or transfer their defined contribution benefits. The numbers seeking this help has declined though in the second year and is just 8 per cent higher than the ‘pre-nudge’ figures.
Wealth manager Quilter, analysed this data from the Money and Pensions Service (Maps). It said it reflected the “disappointingly low impact” the current rules were having and highlighted the need for earlier pensions engagement. It pointed out that rather than choosing to seek guidance, people have to make an active choice not to seek it.
Quilter said that for those looking to access their pension pot who have not taken professional financial advice, guidance can be invaluable. However, despite the stronger nudge, there are still relatively few people taking advantage of the support on offer, and many who initially plan to make use of it are backing out prior to their appointment.
The figures show in the first year following the implementation of the stronger nudge, there was a total of 124,316 guidance sessions attended from June 2022 to May 202, a 14 per cent increase on the 109,054 sessions attended in the year before. The latest data from Maps show there were just 117,862 sessions in the last year.
Quilter said there has been an uptick in the number of guidance appointments arranged, when compared to the year prior to the stronger nudge, up 24 per cent in the same period in both 2022/23 and 2023/24.
However, the difference with the appointments attended reflects a considerable increase in the proportion of no shows and cancellations, rising from 25 per cent prior to the stronger nudge to 30.5 per cent in 2022/23, with this figure expected to rise to approximately 34 per cent in 2023/24.
It adds that figures from the Financial Conduct Authority’s retirement income market data show the total number of pension plans accessed for the first time in 2022/23 was almost 740,000, up from 705,666 in 2021/22.
It says this suggests that though the number of people accessing their pension savings year on year is rising, this is not being reflected in a continuous increase in Pension Wise appointments attended.
Quilter said that one factor which could be contributing to the number of no shows and cancellations is the length of time customers often have to wait before being able to access a Pension Wise appointment.
Since the introduction of the stronger nudge, there has often been more than a month’s wait for these appointments, due to a lack of resource. Given the sessions are offered to those who have already decided they wish to access their money and are optional, it is unsurprising that many would not wish to wait.
Quilter adds for guidance to become normalised it has to be publicly championed in the mainstream media and that message to be repeated again and again. Marketing efforts have materially increased usage of other areas of the Moneyhelper pension guidance offering, especially the usage of digital tools but when that marketing is not sustained usage falls away.
Quite head of retirement policy Jon Greer says:“Accessing your pension funds is one of the biggest financial decisions you can make, and guidance can be invaluable for those who opt to go it alone.
“However, despite the stronger nudge, we are still seeing the minority of people attending Pension Wise guidance sessions.
“Though well meaning, the timing of the stronger nudge to pensions guidance comes when many people will already have decided to access their pension saving and have an idea of the action they wish to take. They may therefore view guidance as a barrier to their plans. However, there are likely a great number of people who are opting out and going ahead with their plans with no support at all which could have a serious impact on their financial wellbeing in later life.”
He adds: “With Labour pledging to review pension policy, it may want to factor in the outcomes of the stronger nudge to guidance and whether it is effective, should it win the general election.
“At present, the stronger nudge simply comes late in the process. A solution would be to help manage expectations by making it clear in pension wake-up packs that not only should people seek guidance or advice, but that it is expected prior to them accessing their pension savings. However, normalising seeking guidance is not something that can be achieved solely by nudging customers to pension guidance at the point of taking benefits. It will take a concerted effort to bring it into the mainstream by being highlighted by trusted consumer champions and supported by ongoing marketing efforts.”