Hundreds of thousands of retirement savers will be given a stronger push towards taking pension guidance before they access their retirement cash, under measures to be unveiled by the City regulator.
The Financial Conduct Authority will say on Wednesday that from June 2022, pension providers will be required to offer to book an appointment with Pension Wise, a government-backed service which offers free guidance to savers aged 50 and over, if customers are looking to dip into their funds for the first time.
Providers are currently required to tell only those customers looking to access cash held in defined contribution plans about Pension Wise, which offers free, 45-minute guidance sessions.
“The changes implement a requirement set by Parliament and are designed to increase take-up of the Pension Wise service, which offers free, impartial guidance to consumers about their pension options,” the FCA is expected to say.
“We are focusing on ensuring consumers have the right level of advice and guidance to help them make informed pension decisions.”
Pension Wise was created in 2015 to support savers making decisions about their retirement income options following “pension freedom” reforms, which gave investors full flexibility to take their cash as and when they wished. Since the reforms were fully introduced in 2015, 1.6m people have accessed more than 3m defined contribution pension pots, with a value of more than £45bn.
Around 132,000 face-to-face and phone appointments took place with Pension Wise in 2019-20, a 29 per cent increase on 2018-19. At the same time, FCA data showed that in 2019-20, 50 per cent of all pension pots tapped by members in the contract-based retirement income market were accessed without advice or guidance.
“We want to make sure people get the guidance and advice they need to secure the best retirement possible,” Sarah Pritchard, FCA executive director for markets, said in a statement. “That’s why our new rules nudge savers to explore their retirement options with a free Pension Wise appointment.”
The new rules will apply to providers of personal and stakeholder pension schemes, including operators of self-invested personal pensions (Sipps).
The government has faced calls from industry experts to go further to boost Pension Wise take-up, including ensuring that eligible savers were automatically booked into an appointment with the service, rather than asked if they wished to have a booking made for them.
New requirements from June 2022
• Refer customers to Pension Wise guidance
• Explain the nature and purpose of Pension Wise guidance
• Offer to book a Pension Wise guidance appointment in most cases, or provide customers with information to help people who want to book their own appointment.
Giving evidence to a parliamentary select committee last month, Guy Opperman, pensions minister said it would cost between £45m and £80m to enrol defined contribution savers from age 50, the earliest age at which people become eligible for free guidance on their retirement income options.
Stephen Lowe, director at retirement specialist Just Group, said: “The regulator’s proposals fail to address two key outcomes: first, getting people to use the service at an earlier age when it is most valuable and second, and most importantly, increasing levels of usage up to credible levels.”
“Implementing a small trial to assess the impact of automatically booking appointments for key target groups is the only big idea on the table to drive up usage. The government appears to have given up and it looks like they are content to ration the service.”