Regulator to push Pension Wise harder in wake-up packs

Regulator to push Pension Wise harder in wake-up packs

The Financial Conduct Authority (FCA) is currently reviewing the effectiveness of the retirement wake-up packs, which are sent by providers to individuals six months prior to retirement age.

In its written submission to the pension freedoms inquiry – launched last month by the Work and Pensions Committee – the regulator said that the goal of this analysis is to see whether there is more that can be done to encourage consumers to use the free guidance provided by Pension Wise.

Currently, the watchdog requires firms communicating with non-advised customers about their retirement options to signpost them to Pension Wise.

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However, according to FCA estimates, only around 20 per cent of consumers accessing a defined contribution (DC) pension in the third quarter of 2016 had an appointment with government guidance body.

Possible changes to the wake-up packs will be announced in the retirement outcomes review final report, to be published in 2018.

In the meantime, the regulator will also have to require all trustees and managers of pension schemes to book an appointment at Pension Wise for the individuals that make queries to access or transfer their pensions.

Last week, the House of Lords passed an amendment in the Financial Guidance and Claims Bill on this matter.

However there is no obligation on providers to flag in the wake up packs with those approaching retirement that they may benefit from regulated financial advice.

William Burrows, retirement director at Better Retirement, argued that “the elephant in the room is access to financial advice”.

He said: “I fully support Pension Wise which does an excellent job in providing guidance.

“However, good as it is, guidance cannot do the one thing that most people want, and that is to tell them what the best option is.

“Personally, I would like to see of the resources used in promoting guidance, used to promote the advantages of regulated advice. This must go hand in hand with reducing the cost and complexity of giving regulated advice.”

The regulator’s findings in the retirement outcomes review, which showed that consumers are overwhelmingly more likely to stay with their existing provider if they are not advised, also include an increase in pension related scams.

The FCA said that it is working in this area to see how else it can put an end to these frauds.

Besides working with the Police and Serious Fraud Office and other organisations, the watchdog is developing “a bespoke and targeted pension scams campaign” with The Pensions Regulator (TPR).

“This is currently at an early stage in its development,” the FCA said.

Both regulators will also publish soon a joint pensions strategy, which will give clarity on how the watchdog works with other institutions in this area.