Employers against default pensions for employees

Employers against default pensions for employees

Employers do not back a default pension option for their employees without first giving them access to guidance, a poll has shown.

A poll from workplace specialist Wealth at Work found 86 per cent of respondents believed their employees should not be defaulted into a decumulation pathway at-retirement without financial guidance.

The poll was carried out on the provider's website between July and November 2018 and received 50 responses.

It mirrored Nicky Morgan, chair of the Treasury select committee's comments at the Personal Investment Management and Financial Advice Association annual conference on 31 October that default guidance should be introduced before individuals are allowed to access their pensions.

Jonathan Watts-Lay, director at Wealth at Work, said: "We support guidance pathways at-retirement, so find the news that the Treasury select committee are on board with this approach extremely positive.

"Defaulting individuals into something without a positive choice being made raises questions over if it is actually within the pension provider or the member’s best interest.

"Many will argue that it’s a win for the provider because they keep hold of the member’s assets but it may not be a great option for the member."

Back in April MPs had called for a new form of standardised drawdown to protect pension savers and said providers should be forced to offer the product.

The Work and Pensions select committee said it recognised the danger posed by the 'advice gap' and that savers needed more support in both accumulation and decumulation.

It said the introduction of a default decumulation pathway alongside a fully functioning pension dashboard could address both.

But Mr Watts-Lay warned there was a danger the pension freedoms would be "destroyed" if savers don’t make active choices at retirement.

He also thought such a default option would discourage shopping around.

He said: "As many retirees will have more than one pension, if they all default based on individual pots rather than the collective value, the likely outcome for many will be sub-optimal and less income at-retirement."

He added: "Our experience is that following financial guidance, individuals emerge more confident, knowledgeable and more able to make informed decisions; it has been no surprise to see significant numbers changing their retirement plans, increasing pension contributions and seeking out regulated advice as a result."

Stephen Lowe, group communications director at Just Group, said: "Most people accept there will be winners and losers even if they cannot agree on how many of each. Even the policy's instigator, George Osborne, recognised the potential for disaster, which is why he simultaneously created free and impartial pension guidance."

However, he stated people should not be expected to make complex pension decisions alone. "We cannot even expect many of them to recognise the complexity or even to know that help is freely available," he said.

Savers have access to free guidance at retirement from the government's Pension Wise service. This will merge with the Money Advice Service and The Pensions Advisory Service in January next year.