Salt and pepper, strawberries and cream or gin and tonic, all natural bedfellows.
And new rules, set to come into force this year, aim to create a new partnership, one as synonymous as Laurel and Hardy, Cagney and Lacey, or Ant and Dec: accessing a pension and getting guidance.
Since the introduction of pension freedoms in 2015, savers have had far greater flexibility to decide how and when they can access their defined contribution (DC) pension savings.
These choices can be complex and carry risks and so many savers would benefit from support and guidance on those decisions.
Pension Wise, a government service from MoneyHelper, run by The Money and Pensions Service (MaPS), provides savers with free and impartial guidance about the options for accessing their DC pension savings.
Pension Wise has consistently seen exceptional user feedback, with 94% very or fairly satisfied with their overall experience across all channels. But, retirement data shows only 14% of savers accessing a DC pot for the first time used Pension Wise to access free impartial guidance about their options.
Would so few first-time buyers take guidance when assessing their mortgage options or house buyers ignore the risk of spending hundreds of thousands on a property without having a survey completed?
In our corporate strategy, we made a commitment to savers that they could expect us to enhance the quality of their savings outcomes. Providing consumers with better information to equip them to make decisions is central to achieving good pension outcomes.
That’s why I welcome the Department for Work and Pensions’ plans to require trustees of occupational pensions schemes to:
- offer to make a Pension Wise appointment for the saver
- where having taken reasonable steps an appointment can’t be made at a suitable date or time, trustees must provide the saver with details on how to make an appointment for themselves – this also applies where the saver rejects the offer to book the appointment
- ensure as part of an application to access or transfer benefits for the purpose of accessing, savers either received or opted out of receiving that guidance
The regulations for this are expected to be laid this month [January] and will complement the recent rules from the Financial Conduct Authority (FCA) [PDF] for personal and stakeholder pensions.
Work in this area was informed by the results of consumer behavioural trials which demonstrated an increase in Pension Wise take-up following a nudge, albeit from a low level. It will be interesting to see how much retirement outcomes can be improved by the greater take-up of guidance.
We aim to produce our own guidance too ahead of the new duties coming into force to help trustees and administrators prepare for the changes.
There is still work to do to tackle savers’ apathy when it comes to engaging with their pension. Pension Wise fills a specific purpose well, but savers should be aware of how and when they can access the most suitable guidance for them at their stage in their pension journey.
MoneyHelper, from MaPS, provides other guidance services, and is planning to enhance its guidance offering by directing consumers to the service appropriate for their needs.
MaPS is also starting work on a Pension Wise digital appointment to meet increased take-up of the service and encourage more savers to access the service through lower costs channels, where that works for them.
And the MoneyHelper website already provides guides for savers on auto enrolment, building their retirement pot and dealing with pension problems.
This also links to our joint work with FCA on the Pensions Consumer Journey, which explores what more we can do to help engage consumers as they build up their pension savings, so that they can make informed decisions to optimise their savings outcomes.
We know that these changes will require changes in scheme processes – which is why I hope trustees along with their administrators will be preparing for them now.
Guidance and pensions should go together like fish and chips. I hope trustees will recognise this vital link so that savers benefit from receiving the right guidance, at the right time and ultimately make the right decisions.
By David Fairs, Executive Director of Regulatory Policy, Analysis and Advice