A SIPP consultant has criticised the Financial Conduct Authority’s new rules encouraging a stronger nudge towards pension guidance.
From today pension providers and trustees will have to guide those looking to draw pension savings for the first time towards Pension Wise.
James Jones-Tinsley, self-invested pensions technical specialist at Barnett Waddingham, criticised the rules as ‘poorly timed and mismanaged’.
He said: “At face value, any move to increase people’s engagement with their pension and take advice on their next steps is a positive thing. The Government’s move to push people aged 55 and over to take a Pension Wise appointment before drawing down their pension was a sensible first step; however, it is poorly timed and mismanaged.
“To date, only 1 in 33 of those eligible have taken the appointment. If the timing of the nudge was moved earlier, before people have already made a decision and need their money to be readily available, the value of the appointment would increase exponentially. What’s more, we could learn our lesson from the success of the Covid vaccine booking system and replicate it for those in their 50s to create a smooth, streamlined appointment process.
“At a time when the cost-of-living crisis is hitting pensioners hard, making the right decisions with your money is vital. The FCA and DWP have a duty to meet people where they are, creating the best possible environment for pensioners to have a healthy and happy retirement.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, agreed that is the nudge towards guidance were at an earlier stage of retirement planning it would likely be more effective.
She said: “How and when this nudge is delivered is all important in helping people get good outcomes. The FCA has opted to go with delivering the nudge when the customer applies to take a retirement income. The rules don’t preclude delivering the nudge earlier but by setting the minimum at point of access there’s a chance that this is what many providers will opt for.
“When Hargreaves Lansdown participated in the behavioural trials with the Money and Pension Service it was found the earlier the nudge came in the process, the more likely the person was to take up the appointment. Waiting until a point where someone may already have decided how they want to take their retirement income was never going to be as successful as contacting someone who is still exploring their options.
“The nudge to guidance is also only one step in the journey towards good member outcomes. High numbers of people receiving guidance is positive, but the customer still needs to make decisions around products and providers, and many may continue to struggle. The ability to provide these people with a more personalised guidance service could really help them make more confident and informed decisions around their retirement.”
