The British government has turned down a proposal which would have seen savers automatically booked for a pension guidance appointment with Pension Wise.
The recommendation suggested the trialling of two automatic guidance meetings with the service: one at age 50, before savers can access their pots; and one after they have accessed their pension for the first time.
But the government said the approach presented “significant issues”.
More specifically, making people aged 50 attend a meeting with Pension Wise can present several risks. Most savers “will not be considering how to access their defined contribution savings” at that stage, the government said.
Additionally, nudging them to access the service “at the wrong time” to talk about decumulation, “may encourage members to access their savings earlier than appropriate for them or may cause disengagement with guidance if interventions are not sufficiently targeted”.
This is not to say, the government added, that people should not access pension guidance. The regulation which will implement a ‘stronger nudge’ to access Pension Wise will come into force in June to ensure retirees are “strongly encouraged” to set up a meeting with the service before accessing their pension.
“The proposal to automatically book members an appointment when they seek to access their pension savings, instead of offering to book members an appointment at a time and date of their choosing as is required by the Stronger Nudge Regulations, would be unlikely to lead to any increased engagement with guidance,” the government said.
“It would not successfully utilise inertia, compared to the stronger nudge proposals, as members would still need to take action to engage with and attend a Pension Wise appointment. It would also introduce significant additional issues, such as individuals having multiple appointments booked on their behalf, and increased costs caused by missed appointments.
“Consideration of further possible nudges or referrals to guidance at the point a member requests to access their pension savings should be informed by assessing the success of the regulations on the stronger nudge to pensions guidance.”
‘Myopic’ approach
Tom Selby, head of retirement policy at AJ Bell, agrees with the government. “Ensuring people have access to support, guidance and, ideally, regulated advice throughout their retirement saving is critically important,” he said.
“However, the idea that people should be automatically enrolled into Pension Wise guidance appointments came with huge risks – not least that it would cause costs to balloon and potentially create a spate of delays, cancellations and complaints if it wasn’t something the customer wanted.
“It’s also important to acknowledge that official guidance, while extremely valuable, is just one source of information for people saving, approaching retirement or taking an income.
“Rather than myopically focusing on official guidance, it makes sense to look more broadly not only at the different organisations that can help people make informed decision, but also when that guidance is provided.
“As part of this – and to support the introduction of the FCA’s Consumer Duty – policymakers need to provide greater certainty for firms over the advice/guidance boundary.
“Most providers working with non-advised customers want to provide extra help and support to savers but are restricted by fears of straying over the line into providing advice. If the FCA and government could deliver more clarity in this area then outcomes for savers could undoubtedly be improved.”
