Generic guidance does not help clients make financial decisions, with more people likely to pay for guidance that is tailored to their circumstances, research has found.
A report from the Association of British Insurers (ABI) and Thinks Insight and Strategy’s Behavioural Team found just 14 per cent of people were able to make a decision which would leave them better off with generic guidance.
The figure jumped to 76 per cent when the participants received personalised guidance.
This involved setting a specific withdrawal amount to avoid higher rate tax.
And those who received personalised guidance were slightly more likely to be willing to pay for this service at 46 per cent, compared with the 40 per cent who would pay for generic guidance.
Receiving personalised guidance also reduced the individuals’ need for additional information, down from 56 per cent to 45 per cent.
Dr Yvonne Braun, director of long-term savings at the ABI, said: "Navigating the financial world can be confusing and it’s vital we do more to help people save, invest and make informed decisions when accessing their pensions.
"Our research clearly shows that customers can benefit from guidance tailored to their personal circumstances where it presents clear and relevant options to help decision making."
Personalised guidance is the provision of information and support, tailored to an individual customer, based on data the provider holds on the customer.
Currently, advice rules restrict pension providers, mutual societies and investment platforms from offering guidance beyond that which is generic and purely factual to non-advised customers.
However, last week, the Financial Conduct Authority set out three proposals to reform the advice boundary,
These included a new approach allowing firms to provide support tailored to groups of people in similar circumstances and a new form of simplified advice.
Max Mawby, founder of Thinks Applied Behavioural Science, said: "It is always delightful to see such clear results when you run an experiment.
"The results suggest that firms have the opportunity to deliver much better outcomes for their customers by personalising guidance, particularly when simple choice architecture is used to guide customers alongside more traditional text."
Mawby added that a personalised approach could help firms comply with the FCA's consumer duty rules which were introduced this year.
Steve Webb, partner at LCP and former pensions minister, praised the "vitally important" research.
He added: "We already have a world in which savers have complex choices to make at retirement, and the government is also consulting on giving them additional choices about how and where they build up their pension pot.
"But extra choice can cause confusion and lead to poor outcomes if savers are not helped to navigate these choices.
"Regulations should make it clear that providers can use information which they hold about savers to offer guidance which is personalised and presented in a way that helps people to make good choices."
tara.o'connor@ft.com
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