Our second insight article this week continues to look at what Pension Wise offers and what proposals are on the horizon; and how these might effect workplace pension providers.
A free and independent government service from MoneyHelper to help pension savers nearing retirement, the Pension Wise service has been the focus of heavy investment by the Government and the Money & Pension Service.
The FCA is consulting the pensions and savings industry on other ways to encourage scheme members to access Pension Wise and other guidance. It is working with the DWP, the Money & Pensions Service (MAPS) and The Pensions Regulator to consider whether more changes are required to help drive up the numbers of members using Pension Wise.
Some workplace pension providers have greeted the new rules with scepticism, saying they risk detracting from financial advisers who may be in a better position to offer the best advice to workplace pension savers.
Steven Cameron, pensions director at Aegon, said: “We strongly believe the benefits of seeking regulated financial advice should be given at least as much prominence, with any guidance services offered by providers also signposted. This would allow consumers to make an informed choice based on their needs and the likely costs.
“Financial advice provides a much deeper support for a customer than Pension Wise guidance, including a personal recommendation. So it’s particularly controversial for the FCA to be proposing even customers who have already taken financial advice on retirement options to still be nudged to Pension Wise. In many cases, the adviser may be supporting the customer in implementing their decision to access. While customers can opt out, requiring providers to nudge to Pension Wise in these situations could be seen by customers as the provider questioning the adviser’s recommendation.”
Abrdn, parent company of Standard Life, has also expressed concerns that the proposed drive of workplace pension scheme members towards Pension Wise could backfire and see less people taking advice.
Alastair Black, head of platform proposition, said: “We think there is a risk that, if this is not handled appropriately with suitable rules from the FCA on how this should be delivered, that we may see this shift in the wrong direction away from advice, resulting in poorer outcomes for many.
“Where the FCA propose telling consumers about free impartial guidance or advice they have to pay for – the fact it calls out it has to be paid for (while of course true) risks creating a bias away from advice if consumers don’t understand the value that it can give.”
Others, including former Pensions Minister Baroness Ros Altmann, have supported the stronger nudge towards Pension Wise.
She said the FCA was “finally acting” to protect pension customers better and the move would mean it was much more likely that pension savers will get the “independent, unbiased guidance offered by Pension Wise.”
She added that the stronger nudge will help pension savers make better decisions about their pensions.
One important body that has agreed that pushing more workplace pension members towards the Pension Wise service would help savers make better decisions around retirement is the Work and Pensions Select Committee.
A lack of advice for pension savers currently risks destroying the flexibilities offered by the Pension Freedoms, according to a new report from the MPs on the Committee.
The report published in January called on the Government to do what it can to push the engagement level for Pension Wise to around 60%.
The report calls on the Government to either automatically offer savers looking to take an income from their pension an appointment with Pension Wise, or to automatically offer appointments to people when they become eligible at the age of 50.
The report from the Work and Pensions Committee is part of its first review of Pension Freedoms.
Should these proposals go ahead, it is likely that advisers and employers will see a much stronger push for members towards the service.
Any resulting increase in engagement with pensions could also lead to more workplace pension members looking to book appointments via any sponsoring employer’s pension advice service or directly with an independent financial adviser.