The Financial Conduct Authority (FCA) must require all trustees and managers of pension schemes to book an appointment at a government guidance body for the individuals that make queries to access or transfer their pensions.
This change was made in an amendment to the Financial Guidance and Claims Bill – legislation which will create the Single Financial Guidance Body (SFGB), which will merge Pension Wise, The Pensions Advisory Service (TPAS) and The Money Advice Service.
Providers should also be mandated to send a wake-up message at age 50 to everybody to engage them with the retirement plans.
Baroness Ros Altmann, former pension minister, said today (1 November) at a hearing at the Work and Pensions select committee in Westminster that the “onus should be on the provider" and slated some of their behaviour so far.
She said: "Providers so far have been quite good at pretending they are trying to pass people on [to Pension Wise], some of them genuinely are, but most of them want their customers to call their hotline and buy their own products."
Last month, the Work and Pensions select committee launched an inquiry to investigate whether the pension freedom reforms are working.
With the introduction of pension freedoms in 2015, savers have been seeking to take advantage of the high transfer values of defined benefit (DB) schemes and to move their nest eggs into defined contribution plans, which has pushed MPs to act.
Michelle Cracknell, chief executive of The Pensions Advisory Service, said at the hearing that there needs to be “an intervention so that people realise now that the responsibility for their retirement income is now theirs”.
She said: “We need to artificially push people toward independent impartial guidance.
“If you made contact with the provider to have the value of the policy, what you would get back is an appointment time for when you should receive guidance.”
Pension providers are already obliged to refer clients to Pension Wise for guidance.
However, Baroness Altmann explained that at at the moment, “it is all mixed up in a letter from the provider that also gives the number that people can call for their own hotline”.
She said: “[Savers then] think they have had the free help and they don’t even bother with Pension Wise.”
Sir Steve Webb, head of policy at Royal London, agreed with Baroness Altmann’s view.
He said: “We have found that when we say to people when they phone us up six months before pension age why don’t you go to Pension Wise, they say ‘why are you stopping me getting my money?’
“The research evidences that people have already decided that late, so all of this pointing to guidance needs to be much much earlier, when people haven’t made up their mind and guidance can help shaping it.”
This is also the reason why Baroness Altmann is advocating for a wake-up message to be sent to all individuals when they turn 50-years-old.
She said: “From a consumer view, you need to change the journey.
“We still have these so-called wake-up packs. Forty-pages guaranteed to send you to sleep, which are sent out six months before some supposed retirement age when most people are still going to be working.
“The message they send to people, which was deliberate before, is that your pension is over. You now need to decide what you are going to do.
“That is completely the wrong message at a time when people are still working and are likely to continue.”
Baroness Altmann would like to see the FCA replace these packs with a single page standard message.
She said: “We need a standard pension statement, where everybody can see how much they have in their pension in one page."
This idea is similar to the pension passport, which has been the object of a trial by insurer LV.
maria.espadinha@ft.com
