The Work and Pensions Committee has called on the government and the Financial Conduct Authority to report their progress in clarifying the boundary between advice and guidance by March 2023.
The committee’s report on savings for later life, part of its inquiry on the impact of the pension freedoms, said it had heard concerns about stepping over the boundary from guidance into advice continuing to constrain the support that pension schemes and employers can provide to savers.
According to the report, the regulators are working with pension schemes and providers to better understand these concerns and to gather practical examples of where this is causing a problem.
Earlier this week (September 27), the FCA’s executive director Sarah Pritchard said the regulator will make sure that it does what is best for the UK, retaining market integrity and protecting consumers and will carry out a review of the advice-guidance boundaries.
Elsewhere, the report called on the government to introduce auto-enrolment reforms next spring, while setting up new policy goals to ensure a “new consensus on adequate retirement income” is achieved.
In addition, it made a series of recommendations to boost minimum pension contributions, while detailing policies to improve self-employed and gig economy workers’ savings, as it concluded that “more than 60 per cent of people are at risk of missing out on an adequate standard of living in retirement”.
Published on September 30, the report cited research from the Pensions Policy Institute, which showed that only 39 per cent of households and 37 per cent of individuals are on track for an adequate pension, according to the definition used by the Pensions Commission.
The MPs also noted that savers in their forties and above “are most at risk if they do not have access to a defined benefit pension, as they have had limited time to build up a pension through auto-enrolment”.
Work and Pensions Committee chair Sir Stephen Timms said: “While automatic enrolment has been successful in boosting participation in workplace pension saving, many people will be feeling a false sense of security holding on to the idea that putting away the minimum amount will be enough to enjoy a fulfilling retirement.
“The blunt truth is that many employees need to save more but do not realise it. The government must urgently consider how to boost saving, including examining the case for increasing minimum contributions, before it is too late.”
After analysing the evidence received, the MPs noted that there are two measures currently used to calculate pensions adequacy — the Pensions Commission’s target replacement rates and the Pensions and Lifetime Savings Association’s retirement living standards.
“There is no consensus on a single definition or on what outcomes the pensions system should be designed to achieve,” the report noted.