Government backs down on guidance requirement for pensions
Pension providers have welcomed an amendment to the Financial Guidance and Claims Bill changing the requirement to seek advice when taking benefits under pension freedoms.
Previously, the rules would have required people looking to access the freedoms or transfer benefits to be enrolled automatically into a ‘guidance’ option.
Under the amendment, providers only have to ask customers whether they have received ‘appropriate pensions guidance or appropriate independent financial advice’. If the retiree says they haven’t received guidance, the provider has to recommend they seek guidance or advice and ask the member whether they wish to wait until receiving guidance or advice before accessing their pot or transferring.
Tom Selby, senior analyst at AJ Bell, said the original ‘auto-guidance’ idea was weak and this represents an improvement: “Automatically enrolling members into guidance for each transfer or every time they took money from their own pension pot – when they have already decided what they want to do – would have caused massive delays and huge complaints.
“Furthermore, it was by no means clear that it would have a material impact on the take-up of guidance. It therefore risked being both infuriating to customers and ineffective.
“The new amendment is a vast improvement and in the short-term should help increase awareness of the importance and value of advice and guidance. It also gives the Financial Conduct Authority breathing room to consult on alternative nudges towards guidance that have been shown by research to be effective.”