Mandatory pension help gains widespread support

In a 16-page document, Lighting pension pathways: guiding pension savers through freedom and choice, pension provider Just has recommended making guidance 'compulsory' in a similar fashion to auto-enrolment into a workplace pension.

Research included in the report suggested 75 per cent of savers feel financial advice or guidance should be required when deciding how to use pension benefits.

Stephen Lowe, group communications director for Just Group, commented: "As auto-enrolment into pensions has shown, it is possible to use defaults to encourage better decision making.

"Automatically enrolling people into guidance would significantly increase the use of this valuable service."

The white paper stated that while Pension Wise gets "rave reviews" from users, more than nine in 10 people in the UK do not use the service when they choose to access their pension benefits.

Moreover, the cost of independent advice is a "factor putting some people off using regulatory advice", Mr Lowe said - and yet they do not even take advantage of the free guidance on offer.

Effectively requiring advice puts a barrier in place of the individual. Chris Daems

He said while Pension Wise guidance appeared to work, based on Just's study of those using the service, even more people were not seeking any form of official help at all at retirement.

The paper stated: "We believe there is a compelling case for introducing default guidance so receiving it becomes a social norm.

"Savers relish the flexibility offered by the pension reforms and we believe they should be supported to use this wider choice to help them make informed decisions. 

"Encouraging people to receive guidance should become an integral part of the saver's journey as they reach age 50."

The study of 1,000 people also found: 

• 20 per cent saw an IFA.
• 18 per cent spoke with a pension provider.
• 8 per cent spoke with friends and family.
• 36 per cent said "I just want my money".
• Reliance on pension providers was highest among those with the smallest pots.

According to the Pension Wise dashboard, there have been more than 161,000 appointments and more than 5.5m unique visits to the website. 

A spokesman for the department for work and pensions commented: "We want everyone who would benefit from Pension Wise to know how it can support them make the most of their pension.

"This is why we have made it compulsory for pension providers and trust-based pension schemes to signpost savers to it and run marketing campaigns targeting eligible consumers.

“However it is also important that savers have flexibility and are able to choose for themselves the guidance or regulated advice they need before making a decision about their pensions."

Chris Daems, director of -based Cervello Financial Planning, said he "firmly believes" in the principle of helping more people to get advice and guidance as they approach the stage where they are making some of the most important financial decisions of their lives.

However, he added: "The concept of 'automatically enrolling' individuals into guidance or advice is flawed.

"The reason that automatic enrolment works is that individuals do not need to take significant action to be enrolled with this occurring if there is no significant action from the individual. 

"The opposite is true of compulsory advice or guidance. Effectively requiring advice puts a barrier in place of the individual."

While Mr Daems believed in a "regulated free market approach when it comes to making these sorts of decisions", and agreed that more people would benefit from better advice and guidance, he added: "I'm not convinced that approach Just advocates would be either politically popular or practically useful."

simoney.kyriakou@ft.com