Pension firms to be forced to book ‘guidance’ sessions for savers
Pension Wise is an organisation established by the government to provide free guidance to older people about the options open to them in terms of how to make the most of their pension pots in retirement. Currently pension providers have to highlight that the service is available to their savers, and encourage those savers to get guidance or more formal advice to help them understand their options. However, take-up of the Pension Wise guidance sessions remain low.
In a bid to help savers make better decisions over how they manage their money in retirement, the FCA has now proposed that pension firms will not only have to refer savers to Pension Wise guidance, and highlight the purpose of that guidance, but also offer to book an appointment for the saver. The provider can then book that appointment on the saver’s behalf, or provide sufficient information for the saver to do it themselves.
Sheldon Mills, executive director of consumers and competition at the FCA, emphasised that Pension Wise is a great service that helps people understand their options when dipping into their pension savings, but accepted that currently few people are choosing to attend a guidance appointment.
He added: “Our proposals will help to ensure that consumers get more information about the service, are further encouraged to use it and can have an appointment booked for them there and then.”
Providing more choice
Steven Cameron, pensions director at Aegon, highlighted that the introduction of the pension freedoms had given pension savers far more choice about how and when to take a retirement income, and suggested that while proper advice for savers was a good idea, the guidance from Pension Wise offered a “valuable fall back”.
However, he warned against forcing savers to attend guidance sessions, adding: “This needs to remain voluntary as going further and making an appointment compulsory would effectively bar individuals from accessing their own pension funds.”
Accessing our pensions
The latest data from HM Revenue & Customs (HMRC) show that pension savers are taking advantage of the pension freedoms.
In the first quarter of 2021, around £2.6bn was withdrawn flexibly from pensions, up from the £2.5bn registered in the same period in 2020.
Not only is that a record higher, but the number of people accessing their pensions in this way has also jumped to a record high.
Importantly though there remains a big risk of being overtaxed when making those withdrawals, with the latest figures revealing that a massive £23m was returned to savers who had been overcharged in the quarter. According to Canada Life, an incredible ££716m has been returned to overtaxed pension savers since 2015.