Providers will have to offer to book Pension Wise appointments for clients looking to access their defined contribution pensions, under rules proposed by the Financial Conduct Authority.
In a 39-page consultation paper, published this morning (May 4), the regulator said its proposals would encourage savers to take the right guidance at the right time to help them make informed decisions.
Currently, providers are required to signpost consumers to Pension Wise and encourage them to seek appropriate pension guidance or advice to help them understand their options. However, take up of Pension Wise guidance remains low.
The FCA is now proposing that when a saver has decided how to access their pension, providers must refer the consumer to Pension Wise guidance, explain the nature and purpose of Pension Wise guidance and then offer to book an appointment on their behalf.
Providers must also record whether the saver declined the offer to receive guidance, received guidance or went on to receive regulated advice.
Sheldon Mills, executive director for consumers and competition at the FCA, said: “Pension Wise is a great service which helps people to understand their options when accessing their pension savings.
“We know that when people use Pension Wise they are happy with the service and find it helpful. However, few people are choosing to attend a guidance appointment.
“Our proposals will help to ensure that consumers get more information about the service, are further encouraged to use it and can have an appointment booked for them there and then.”
The number of Pension Wise appointments delivered has increased since the service launched in 2015, to just over 130,000 in 2019-20, the last full year for which data are available.
Labour MP Stephen Timms, chairman of the Work and Pensions Committee, brought an amendment to the pensions schemes bill in 2020 that would have made an appointment with Pension Wise automatic.
However, this amendment was overturned in the bill's passage through Parliament
The FCA said a nudge to guidance should still be given even if the saver has previously received guidance from Pension Wise or seen an adviser. This is because a saver’s circumstances may have changed and a different option may now be more suitable.
The regulator has left it up to providers to decide how to explain the purpose of receiving guidance, but has said they must do it in a way which is “clear, fair and not misleading”.
Likewise, the FCA has not set out a way in which an appointment should be booked for a saver, saying providers can use the Money and Pension Service’s online booking system or appointment booking line.
If the individual did not attend or book an appointment when they said they would, the provider should deliver the nudge again, the FCA said.
The regulator is also considering making it more difficult to opt out, to ensure it is not seen as the quickest way to access a pension pot.
For example, there could be a cooling off period. This could include a minimum time period that savers must wait before providers can accept confirmation of their decision to opt out of taking guidance.
But this poses the risk that those who do take up the guidance may do so unwillingly without being engaged in the process and then may cancel or simply not attend the appointment.
Another option could be requiring the saver to confirm their decision to opt out through a separate communication, giving them time to reflect on their decision.
Steven Cameron, pensions director at Aegon, supported the FCA’s measures as another way to help protect consumers.
Cameron said: “Ideally, individuals would seek professional financial advice on such an important decision which could impact their financial position throughout retirement.
“For those who are unwilling to do so, or feel the costs are prohibitive, guidance is a very valuable fall back and Pension Wise is free to those approaching retirement, as it’s funded by the industry.
“We support measures to strengthen the encouragement or ‘nudges’ to make a Pension Wise appointment so as many as possible use their valuable service, which can also help protect them against falling foul of pension scams.
“But this needs to remain voluntary as going further and making an appointment compulsory would effectively bar individuals from accessing their own pension funds. Alongside Pension Wise, it’s important that pension providers can also offer individuals a range of guidance services personalised to their needs throughout their pension journey.”
amy.austin@ft.com
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