The Financial Conduct Authority’s new rules guiding customers to use Pension Wise before drawing down their pension, which came into force on June 1, have been criticised as “poorly timed and mismanaged” by one provider.
Trustees and providers are now required to offer customers aged 55 and above, who are accessing their funds for the first time, an appointment with Pension Wise. The service offers free 45-minute sessions on savers’ retirement options.
The FCA said that this “nudge” can be delivered when the customer applies for a retirement income.
James Jones-Tinsley, a self-invested pensions technical specialist at Barnett Waddingham, said that the initiative was positive at face value.
He added, however, that the idea was badly timed and had been mismanaged. “To date, only one in 33 of those eligible have taken the appointment,” he said.
“If the timing of the nudge was moved earlier, before people have already made a decision and need their money to be readily available, the value of the appointment would increase exponentially.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, agreed that the nudge would be more effective if delivered earlier.
She noted that behavioural trials with the Money and Pensions Service revealed that the earlier the nudge was introduced to the process, the more likely a customer would attend an appointment.
“How and when this nudge is delivered is all important in helping people get good outcomes,” she said.
“The rules don’t preclude delivering the nudge earlier, but by setting the minimum at point of access there’s a chance that this is what many providers will opt for.
“Waiting until a point where someone may already have decided how they want to take their retirement income was never going to be as successful as contacting someone who is still exploring their options.”
Only 14 per cent of those accessing their defined contribution pensions for the first time speak to Pension Wise, according to Standard Life.
“The ambition to have a greater proportion of people accessing independent guidance should be welcomed, particularly when just 20 per cent of 50 to 65-year-olds have taken the more comprehensive and personalised option of speaking to a financial adviser,” said Jenny Holt, Standard Life’s managing director for customer savings and investments.
She warned, however, that more needs to be done to inform savers’ decisions, given the range of assets that many savers hold in addition to their pension pots to fund their retirements.
“We would like to see further action taken to help put more tailored guidance in place and to enable our industry to play a greater role in closing the guidance gap,” Holt added.
Alex Janiaud is deputy editor at FTAdviser's sister publication, Pensions Expert