Legal & General’s pilot of pensions guidance saw just 2.5 per cent of retirees take up the offer, sparking fears that the vast majority of people will receive no help when accessing the new pensions freedoms, Money Marketing can reveal.
The L&G pilot was launched in conjunction with The Pensions Advisory Service and LEBC between April and May and contacted 9,000 individuals coming up to retirement.
The overall take-up rate to letters issued was just 2.5 per cent, meaning only 225 savers received pensions guidance.
The scheme was launched through three channels with take-up of 2.6 per cent through TPAS, 2.3 per cent through L&G and 2.8 per cent through LEBC.
Those who received the wake-up pack given to people with less than six months until retirement saw the take-up rate increase to 4 per cent.
From next April anyone aged 55 or over will be able to access their pension pot in full and have the right to free, face-to-face, impartial guidance.
The guidance regime will be delivered by TPAS and the Money Advice Service and funded by a levy on advisers and pension providers. More details are expected shortly.
Some have raised concerns that the Government’s guidance guarantee could see take up as low as 10 per cent next year and questioned whether it should be made compulsory.
L&G individual retirement solutions director of strategy Tim Gosden says: “We expect the uptake to improve next year as there will be a media build-up. It was very early on and we now know we have to communicate about the guidance guarantee in written and verbal communication. The objective is to make aware consumers about the options and choices instead of making a recommendation.
“It will be difficult to get around consumer apathy without making it compulsory. The choices are far more complicated and there are so many more opportunities to make big mistakes such as people cashing in their pots, which could have a significant effect. It’s freedom and choice but also a minefield which is why the guidance guarantee is so crucial.”
Gosden suggests sending out separate letters alerting consumers to the guidance guarantee, instead of the FCA proposal to include it in the wake-up packs.
L&G research on the guidance guarantee earlier this year found that when it was explained to them only 11 per cent of consumers discounted it completely. In addition 39 per cent would consider opting for a financial adviser.
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.”