Robo-advice could solve problems faced by those relying on defined contribution pensions in retirement, but must be robust enough to stop its mis-use by scammers, the Pensions Policy Institute has said.
In its report, sponsored by LV, looking the PPI looks at the demand for and supply of financial advice and guidance, with some options for bringing these in line with each other.
The think tank is worried about risks to the quality of life of DC savers if they do not take advice to help them get more from their savings.
In terms of solutions, the report backed greater publicity for the government’s retirement guidance inititative Pension Wise, suggested boosting employer involvement in the provision of advice, looking into some form of voucher scheme, and making wider use of robo-advice to reduce cost.
The use of scalable solutions, such as robo-advice and online guidance, is emerging in the UK and may reduce the cost of advice so that it is perceived as affordable, the report said.
However, any robo-advice solution will need to be sufficiently robust to deal with current market concerns around the risk of mis-advising people, as well as the potential for scamming, it added.
John Perks, managing director for retirement solutions at LV, said: “It is important to understand the reasons behind the advice gap, and how to address them, so everyone can access affordable, regulated advice when they need it most.”
The provider’s managing director of life and pensions Richard Rowney previously told FTAdviser that the government should give people aged 55 and over a £250 voucher to go towards an advice session.
Melissa Echalier, a senior policy researcher at PPI, said: “While there remains a gap in pensions advice and guidance provision, we are seeing the emergence of approaches that may reduce the cost of advice to a level that is acceptable to DC pension savers.”
The National Employment Savings Trust’s chairman of trustees Otto Thoresen, commented that some of the risks this research highlights are particularly relevant to savers who have been automatically enrolled into pensions.
“The evidence suggests auto enrolled savers are even less likely to seek or act on financial advice.
“We believe there’s a role for trustees, acting in their members’ interests, to help provide people with safeguards so even if savers don’t take up advice, they can still get good results from their pension pots.”