Pension savers are showing total disregard for the FCA’s risk warnings that were brought in to protect retirees from the most damaging choices at retirement.
New figures produced by Citizens Advice show just 1.6 per cent of people who received the warnings – which are delivered by providers – changed their mind as a result.
The survey of 500 over-55s who accessed their defined contribution pots reveals the so-called ‘second line of defence’, brought in just a month before the reforms went live, is not working.
Retirement Advantage pensions technical director Andrew Tully says: “It looks like people have decided what they want before they even get to guidance. Once people have made up their minds, it is really difficult to change them, and any intervention at that point is probably too late.”
In contrast, 20 per cent of consumers changed their plans after an initial conversation with a provider, the research also shows.
Citizens Advice suggests the regulator consider changing the rules so consumers are given warnings earlier in the process.
Citizens Advice chief executive Gillian Guy says: “Risk warnings are the last line of defence in protecting consumers from making poor choices about their pension, so it’s concerning they are having a very limited impact on people’s decision making.
“The FCA was right to introduce risk warnings and it’s good to see they plan to deliver these earlier to consumers wanting to access the secondary annuity market. To help consumers choose the best option for them, risk warnings should come earlier in the process across all pension options and be tailored to a person’s circumstances.”
Just Retirement group communications director Stephen Lowe says: “Risk warnings are part of a package of consumer protection measures and should not be looked at it in isolation.
He adds: “People have saved for what may be as long as 40 years, and there is a chance their savings may need to support them for a further 40 years, so taking 40 minutes or 4 hours to work through the options and ensure they are equipped to make an informed decision does not feel disproportionate.”