Three out of four savers support the idea that advice, or guidance, should be mandatory for those accessing pension benefits, according to a new report.
The report by Just says this shows there is “broad consumer support” for the implementation of “default guidance”, which it says should help savers make better decisions about their retirement.
Currently free guidance is available through the Government’s Pension Wise scheme, but only one in 10 people have accessed this service before taking pension benefits.
Just says this lack of awareness and low levels of use threatens to undermine the long-term success of pension freedoms.
The report comes shortly after the work and pensions select committee of MPs announced it will be investigating the pension freedoms rules, and whether they were benefiting consumers.
Just is calling for a “guidance pathway” to be introduced, to ensure savers are getting appropriate information on their pension options.
This would involve better promotion of Pension Wise, improved communication with all pension savers aged 50 plus, and the inclusion of retirement guidance as part of the automatic-enrolment sales process.
Just group communications director Stephen Lowe says: “Pension Wise is working exceptionally well, but only for the very small number of people who use it. Providing a pathway into guidance will encourage far higher levels of engagement. We know this support works, because people who took guidance or advice reported higher than average levels of confidence when making decisions.”
It is unclear how an extension of pension guidance services would hit demand for adviser services.
At present regulated advice is compulsory for those looking to transfer defined benefit pensions of over £30,000. But it is not required for those using pension freedoms to cash in part, or all of their defined contribution scheme.
Just claims that these proposals would ensure all customers, regardless of the size of their pension pot, get access to appropriate information about retirement options.
Lowe points out that almost all mortgage borrowers are required to take advice on options before signing up for this debt.
Their report though points out that pensions are far less understood than home loans, yet far fewer people were seeking guidance or advice on their retirement options.
The report shows only 40 per cent of people felt pensions were easy to understand, compared to 63 per cent for mortgages. Almost seven out of 10 people said they felt confident making mortgage decisions. In contrast, just over half of those surveyed, 52 per cent, said they felt confident making pension decisions.
Lowe says that it is a “glaring contradiction” that mortgage borrowers are required by law to take professional advice, but pension savers are left to sort out their own support or advice.
He adds: “It took the turmoil of the credit crunch to give mortgage borrowers the professional support they need. Let’s not wait for a pensions crisis before giving pension savers the same help.”