Experts are warning next year’s reforms to pension freedoms could be a “car crash” unless take-up of pensions guidance is much higher.
Writing to 9,000 customers between April and May, the pilot saw just 225 retirees take up the offer of guidance. Experts say the unwillingness of savers to engage with the guidance presents a significant policy challenge to the Treasury.
Partnership head of corporate affairs Jim Boyd says: “These figures must be a significant matter of concern for the Government and the industry. It is still early days and there is a lot more room to generate awareness and support for greater engagement and Partnership will be working with the industry as hard as we can to ensure there is significant and much higher take-up.”
Just Retirement group external affairs and consumer insight director Stephen Lowe says: “There are very significant risks that people will get a worse outcome than in the pre-Budget environment because more choice creates more inertia. The Government policy response is guaranteed guidance.
“If there is no guaranteed guidance taken then surely that equals greater risk with no antidote. That’s why the FCA must put in place a plug – to block the massive gap created in policy and to protect people from defaulting without help.”
Hargreaves Lansdown head of pensions research Tom McPhail says more engagement, media campaigns and advertising will have a big impact on take-up before next April.
He adds: “Even if we see better take-up than L&G, there will be a very substantial proportion and possibly a majority who won’t take guidance. There is a critical task for regulators, especially the FCA, to have robust regulation in place to protect propel buying retirement income solutions without having received guidance or advice. This has the car crash potential to make the Blues Brothers look like a health and safety video.”
At the Labour party conference last month, Work and pensions select committee chair Dame Anne Begg said if take-up was as low as 10 per cent or 20 per cent the Government should consider making it compulsory.
Speaking to Money Marketing following the publication of the L&G findings, Begg says: “We need a campaign to tell people what is on offer from guidance and if they still need advice as well. We need to persuade people this is something they need to do. I would hope take-up is close to 100 per cent because most people need to be directed in some way.”
Fidelity retirement director Alan Higham adds: “Without any changes to provider communication it simply leaves all the same problems the FCA found in its annuities review on engagement.
“There are potential for more and worse problems in the new pensions freedom environment. I am concerned the way this is being implemented is not going to lead to good outcomes for consumers.”
The Treasury was unavailable for comment.