Hundreds of thousands of retirement savers will benefit from a stronger incentive to take retirement advice before accessing their retirement money, in measures to be unveiled by the city’s regulator.
The Financial Conduct Authority will say on Wednesday that from June 2022, pension providers will be required to offer to make an appointment with Pension Wise, a government-backed service that offers free advice to savers aged 50 and over. , if customers are looking to dive in. in their funds for the first time.
Providers are currently required to inform only customers looking to access cash held in defined contribution plans about Pension Wise, which offers free 45-minute orientation sessions.
“The changes implement a requirement set by Parliament and are designed to increase the use of the Pension Wise service, which offers free and impartial advice to consumers on their retirement options,” the FCA is expected to say.
“We strive to ensure that consumers have the right level of advice and guidance to help them make informed retirement decisions. “
Pension Wise was established in 2015 to help savers make decisions about their retirement income options as a result of “retirement freedom” reforms, which gave investors the flexibility to take their money when and where. they wanted it. Since the reforms were fully introduced in 2015, 1.6 million people have gained access to more than 3 million defined contribution pension funds, worth over £ 45 billion.
Approximately 132,000 in-person and over-the-phone appointments took place with Pension Wise in 2019-2020, an increase of 29% from 2018-2019. At the same time, FCA data showed that in 2019-2020, 50% of all member-operated pension funds in the contract-based retirement income market were accessed without advice or guidance.
“We want to make sure people get the advice and guidance they need to ensure the best possible retirement,” Sarah Pritchard, FCA’s executive director of markets, said in a statement. “That’s why our new rules encourage savers to explore their retirement options with a free appointment with Pension Wise. “
The new rules will apply to providers of personal pension plans and stakeholders, including operators of self-invested personal pensions (Sipps).
The government has faced calls from industry experts to go further in increasing the use of Pension Wise, including ensuring that eligible savers are automatically scheduled to meet with the service, rather than asking them if they wanted a reservation made for them.
New requirements from June 2022
• Refer clients to Pension Wise guidelines
• Explain the nature and purpose of the Pension Wise guidelines
• Offer to make a Pension Wise orientation appointment in most cases, or provide clients with information to help people who wish to make their own appointment.
Testifying before a small parliamentary committee last month, Pensions Minister Guy Opperman said it would cost between £ 45 and £ 80million to enroll defined contribution savers from the age of 50, the oldest age early stage at which people become eligible for free advice on their retirement income options. .
Stephen Lowe, director of 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 usage levels to credible levels.
“Implementing a small trial to assess the impact of automatic appointment scheduling for key target groups is the one big idea on the table to increase uptake. The government seems to have given up and it seems they are just rationing the service. “