A member of an intergenerational select committee has called on the government to introduce mandatory advice for people accessing their pension savings.
Baroness Sally Greengross, a cross-bench member of the House of Lords, described financial advice as "paramount" and suggested certain elements should be mandatory to ensure the future wellbeing of consumers.
She made the call whilst speaking on the financial regulator's "Inside FCA" podcast this week, in which she admitted she did not know how big an issue was posed by consumers spending their pension savings unwisely but said it merited further investigation.
Baroness Greengross said: "I think perhaps government should make it mandatory people do get advice or guidance when they want to get into their pension savings, because it’s fine spending it all on a lovely holiday or something until you realise what the costs of care are and you need them in the next six months."
She added: "I think default guidance is very important there and perhaps that should be mandated."
She also hailed the role of financial advice as "absolutely critical" in helping younger generations manage their money over an elongated life span and saving for a pension through auto-enrolment.
Advice is currently mandatory for savers who wish to transfer pension pots worth more than £30,000 out of defined benefit schemes.
But it emerged last year that many providers were asking for advice on smaller amounts too before accepting a transfer.
What's more, earlier this year FTAdviser reported savers with pension transfer values close to the £30,000 could also find themselves having to take advice after their pensions are equalised, because this could breach the £30,000 threshold.
This comes after a landmark ruling in the High Court found trustees of the Lloyds Bank pension scheme must equalise benefits between women and men who have guaranteed minimum pensions because of contracted out benefits.
Baroness Greengross is a member of the House of Lords select committee on Intergenerational Fairness and Provision, which in April published a 114-page long report calling for action on the national insurance system and the state pension triple lock.
Baroness Greengross said: "People don’t have a clue about the costs of care, and this may change, but it’ll be some years before it does and many more people need care than will admit to even thinking about it.
"So, that sort of thing is essential. And I think employers, specialist advisors and you yourselves [the FCA] are absolutely an essential part of the broader education of people in this country because it’s astonishing, there’s an astonishing amount of ignorance."
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