At last the FCA will force providers to help customers with unbiased PensionWise guidance.
- Pension freedoms were always intended to go hand in hand with help for customers to understand the risks of taking money from their pension.
- PensionWise service has rave reviews but less than one in ten customers use it before withdrawing or moving their pension money.
- Let’s hope providers do ensure their customers take-up PensionWise appointments to help avoid scams or expensive irreversible mistakes and unnecessary tax bills.
The FCA has just announced a consultation that could be really good news for pension customers. https://www.fca.org.uk/publications/consultation-papers/cp21-11-stronger-nudge-pensions-guidance
FCA finally acting to protect pension customers better: The FCA is proposing to make it much more likely that pension savers will get the independent, unbiased guidance offered by PensionWise which can help them make better decisions about their pensions and avoid scams.
Pension freedoms were designed to go hand in hand with PensionWise: Major reforms in 2015, which enabled pension customers to use their pension fund in the way that best suits them, rather than most people having to buy an annuity which was irreversible, often poor value and might not reflect their needs, were always intended to be accompanied by independent, officially established guidance that would explain the risks of taking money out too soon, or of transferring into a scam scheme.
Rave reviews for PensionWise: Sadly, the take-up of this excellent service has been woefully low, with more than 90% of customers never having the appointment they are entitled to. Yet, those who do use PensionWise report being very satisfied, with over 90% satisfaction ratings, so clearly this service is doing a great job, but not enough people know about it.
Providers must step up to the plate to ensure customers know the risks before it’s too late: Pension providers will be asked to explain the importance of PensionWise and why customers should use it. Providers’ staff should help customers understand that using the free PensionWise Guidance service can save them huge sums, whether by ensuring they do not pay too much tax, or do not lose valuable guaranteed benefits, or do not fall victim to scams or fraud. Once such problems have arisen, they cannot be undone.
People need help with pension risks and complexity: Anyone without a financial adviser is likely to benefit from a free PensionWise session, so they are better equipped to make the vital decisions that will help them make the most of their hard-earned pension savings. Even those who do have an IFA to help them could benefit from discussing their pensions before moving their money or withdrawing from their fund too soon.
I am delighted to see the FCA Consulting on this: I would have preferred an automatic enrolment option, rather than leaving the provider in charge of the messaging for customers, but hopefully the providers will explain clearly to customers why they would benefit from using PensionWise and then they can have a much better chance of making the most of their money.