New rules have been proposed by the Financial Conduct Authority (FCA) that would lead to everyone taking money from their pension pot being ‘nudged’ towards guidance service PensionWise.
The proposals would ensure that consumers benefit from the free guidance service before accessing money in their defined contribution pension pot.
As part of the proposals, pension providers would be required to direct their customers towards the guidance services, booking an appointment with Pension Wise if the consumer wanted one.
As things stand, pension providers only need to signpost their customers to Pension Wise guidance and encourage them to seek appropriate pension guidance or advice designed to help them understand their pension income options.
Despite this signposting, the take up of the Pension Wise guidance service remains very low.
Under the proposals from the FCA, consumers would receive a further opportunity to takePension Wise guidance, which includes making an appointment on their behalf. This opportunity would be presented while they are already having a conversation about their pension pot.
If the rules are adopted, they will implement a requirement set by Parliament to encourage consumers to take Pension Wise guidance.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said:
“Pension Wise is a great service which helps people to understand their options when accessing their pension savings. We know that when people use Pension Wise they are happy with the service and find it helpful. However, few people are choosing to attend a guidance appointment.
Our proposals will help to ensure that consumers get more information about the service, are further encouraged to use it and can have an appointment booked for them there and then.”
The proposals would place an onus on pension providers to refer the customer to Pension Wise guidance, explain the nature of this guidance, and offer to book an appointment on their behalf.
This requirement would be triggered when someone has decided, in principle, how to access their pension savings.
It’s worth noting that Parliament decided not to make Pension Wise appointments mandatory, but they want to encourage a better take up of this guidance service.
While Pension Wise is a valuable free service for people taking money from their pension pot, it is only guidance. It does not replace tailored financial advice based on individual circumstances and goals.
Indeed, part of the Pension Wise appointment will often signpost people to seek financial advice where appropriate.