The work and pensions committee has criticised the government for not being clear on how it intends to safeguard people at point of retirement.
In a letter to pensions minister Guy Opperman and economic secretary to the Treasury John Glen dated 2 February, Frank Field, chair of the committee, demanded further scrutiny of the merits of automatic guidance or advice before people can access their pots.
The government removed an amendment to the financial guidance and claims bill on 25 January, which sought to introduce a form of default guidance for people wishing to access their pension pots where they would need to take or expressly opt out of guidance, akin to auto-enrolment.
It had replaced it with a rule requiring providers to ask clients whether they have taken guidance, not enforce a formal opt out requirement.
Mr Field wrote: “Existing rules already require schemes to 'signpost' to the public guidance service and to recommend to their clients that they seek appropriate guidance or advice. It is not clear how the government's amendments take us further forward towards the taking of guidance or advice becoming the default course of action.”
He added: “As the Bill continues its progress in the House, I would invite you to give further consideration to how access to a pension pot might, subject to reasonable exceptions, be made contingent on taking a guidance or advice appointment unless the member explicitly opts out.”
Since pensions freedom in April 2015 people can access their retirement cash freely from age 55 and the committee sought to help them in their decision making by introducing default guidance.
Industry views on the issue have been mixed. Stephen Lowe, director of retirement specialist Just, for instance, backed the tighter proposal, saying it would equip people to make better informed decisions and help to prevent people from being scammed.
Others like AJ Bell predicted complaints would "go through the roof" if mandatory guidance was put in place in its previously proposed form.
The firm also said providers could not be expected to be responsible for referring their clients, which was "no small task".
Tom Selby, senior analyst at AJ Bell, said the amendment was a “vast improvement” and would help increase awareness of advice and guidance.
“It also gives the FCA breathing room to consult on alternative nudges towards guidance that have been shown by research to be effective,” he said.
carmen.reichman@ft.com
