The government has rejected calls to automatically enrol pension savers into a guidance appointment with Pension Wise before they can access their retirement pot.
In its response to the work and pension committee's report, Protecting pension savers—five years on from the Pension Freedoms: Accessing pension savings report, the government said it shares the committee’s desire to see increased take up of the free guidance through Pension Wise, however argued it does not wish to “compel those who do not wish or may not need to receive guidance”.
It said the stronger nudge to pension guidance will ensure that individuals in scope will not be able to access their defined contribution pension savings unless they either receive Pension Wise guidance or express a firm and clear preference to opt out of guidance.
It also allows schemes to offer to book members an appointment at the earliest point possible, before they have made a final decision about access.
“We believe this approach gives strong encouragement towards those who may benefit from guidance to take up the offer of a Pension Wise appointment before accessing their defined contribution (DC) pension savings,” it said.
“We do not believe that it is appropriate to set a target figure for Pension Wise uptake, as we believe the decision to take up guidance is a personal one, which is affected by a variety of individual circumstances. We also do not support the trial of a system by which members are automatically booked a Pension Wise appointment.”
The government said the decision to use advice or guidance will depend upon individuals’ circumstances and should be understood within context.
It could be affected by an individual’s levels of financial literacy, other sources of information and guidance they may have utilised, and the makeup of their pension savings.
“We are committed to ensuring individuals have the support and information they need to make informed choices about their financial futures, striking the right balance between providing vital protections for pension savers, while also giving them freedom and choice over how they use their hard-earned savings,” it said.
Alongside the cost concerns, the government argued that it believes this intervention risks driving members towards pension guidance that may be inappropriate for them and risks further disengagement with guidance services.
Stephen Timms, chairperson of the work and pensions committee, said: “We welcome the government’s commitment to take forward work on many of the important issues we raised – for example, to extend collective defined contribution schemes and improve the data we have on what individual savers are doing.
"We remain concerned however that, without an ambitious target, take-up of Pension Wise will continue to be low. The government has rejected the committee’s recommendation for trials of automatic Pension Wise appointments, deciding instead to proceed with its ‘stronger nudge’, which the committee did not think would be enough to make receiving pensions guidance the norm. Ministers must now set out plans to monitor the impact of the stronger nudge, what they think will count as success, and set a timeline for review.”