Last night (31 October), during a debate on the Financial Guidance and Claims Bill, the House of Lords passed an amendment that will mean the Financial Conduct Authority must require all trustees and managers of pension schemes to ask people, at the point at which they seek to access or transfer their pensions, whether they have received information and guidance available to them from an incoming financial guidance body.
If they have not received that guidance, the amendment stated the FCA may require the trustee or the pension scheme manager to provide the individual with access to it before they can proceed with the access or transfer request.
In effect, the amendment to the bill means the FCA can require that people at risk are defaulted into guidance through their scheme.
Lord John Kevin Sharkey, a Liberal Democratic politician, said: "When it comes to pension pot access or transfer, the problem with our current financial information and guidance system is not the quality of the information or advice, but the very low level of take-up.
"The FCA reports that, of those over the age of 55 planning to retire in the next two years, only 10 per cent had used The Pensions Advisory Service (Tpas) and only 7 per cent had used Pension Wise.
"The simple fact is that too many people will be making decisions about their pension assets without information or guidance.
"The amendment would require the FCA to change its rules to make possible the provision of last-minute information and guidance to those who have not already had it and who are about to access or transfer their pension assets.
"Adopting the amendment would mean that people accessing their pension funds could be given a final nudge.
"There is no compulsion; simply the provision of a last-minute opportunity to see for the first time - for those who have not seen it already - the excellent information and advice available to them, if the FCA judges them to belong to a category that is particularly at risk."
Former pensions minister Baroness Ros Altmann said while providers already have to mention that Pension Wise is available clearly the message is not getting through.
She said: "Too often, the public do not read the materials they are sent or are encouraged also to call the providers’ own hotlines.
"Once they have done that, people often feel they have already had free help and, even if they do not realise that it is not unbiased or impartial and may not have explained all the issues they need to consider, they do not go on to Pension Wise.
"To ensure that people have a guidance session before they engage with their provider about the possible options for their pension is more likely to result in them not taking out money yet, which the provider may not tell them about, or realising that there are many reasons to keep the money in pensions, such as not being taxed or losing the tax benefits of pensions.
"Of course, financial advisers can help here, but for those who do not have such independent advice the free guidance service is important."
Labour’s Lord McKenzie of Luton said the amendment was needed because now is the time to make sure that pensions are fully protected.
He said: “Having freedoms is one thing but being able to use those freedoms effectively with financial knowledge is important.”
emma.hughes@ft.com
