A Government report has said that millions of older savers are struggling to navigate a “pensions minefield” and need more support to make better decisions.
The Work and Pensions Committee report called for trials of automatic appointments with the Pension Wise service to improve the proportion of people approaching retirement and seeking advice.
Government figures suggest that currently, only one in seven people accessing defined contribution pension pots took any advice beforehand.
The report suggests that a 60% target should be set for accessing the Pension Wise service, which helps people aged 50 and over to make sense of their options by offering free, impartial guidance. Pension Wise was set up by the government in 2015 following the introduction of pension freedoms. However, the service is generally considered to be underutilised, with criticisms that there isn’t currently enough encouragement to access the free advice on offer.
There are two automatic appointment proposals in the report, one for an appointment with Pension Wise at the age of 50, before savers can access their pension, and one for an appointment when a person accesses their pension for the first time.
There are also suggestions that the pensions advice allowance, which allows £500 to be withdrawn from a pension up to three times in different tax years for advice, should be reviewed so savers can have more access to their pension to seek professional advice from a financial adviser.
From 1st June, new measures for occupational pension schemes will come into place, requiring employers to present guidance as a routine part of accessing pension savings. Schemes will also need to offer to book a Pension Wise appointment for a saver unless they have opted out of receiving advice.
Figures around this topic clearly show that nudging pension savers is not enough, with too many people heading into retirement without seeking any advice. This risks them making poor decisions regarding the way in which they utilise their pension pots and can expose them to the possibility of falling victim to fraud or scams.
With so many factors to consider around retiring, seeking advice has never been so important. Gresham’s independent financial advisers can review your existing pensions and offer advice before and at retirement for a fixed, one-off fee. For more information, please get in touch.