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Pension assets are crucial for retirement and as such, savers are regularly encouraged to engage with their pots and manage them effectively. However, it can be easy to forget about or lose track of these pots and this problem has come under scrutiny in recent months.
In 2019, the FCA launched wake-up packs which contained warnings on the problems associated with accessing pension pots prematurely.
These packs were sent to people on certain birthdays, with the first arriving on a saver’s 50th.
The packs also encouraged savers to take up free pension guidance but the scheme has appeared to have a limited impact according to analysis of the latest FCA figures.
As Stephen Lowe, a director at Just Group, explained: “Passive measures such as the signposting in ‘wake-up’ packs will at best only deliver marginal gains.
“Consumer-friendly packs are a step in the right direction but need to be reinforced with stronger measures such as the amendment this week proposed by Stephen Timms MP to automatically schedule Pension Wise appointments.”
The amendment Stephen referred to concerns the government’s recently announced “stronger nudge” plans.
Recently, the Department for Work and Pensions (DWP) completed trials on encouraging occupational pension scheme members to seek guidance from Pension Wise before accessing their pensions.
The trials were reportedly successful and the DWP announced plans to introduce additional measures to the wider public.
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However, the “nudge” itself would still just be advisory and as such, Stephen Timms, the Chairman of the Work and Pensions Committee proposed an amendment to the bill involved.
In a nutshell, the amendment proposed changes that would ensure pension scheme holders would receive a Pension Wise appointment prior to accessing pension funds.
In response to DWP’s plans, Mr Timms said: “Pension Wise offers a hugely valuable service for the pension savers who use it: nearly three quarters of them make a different decision after having its guidance.
“But unfortunately only a very small proportion of savers speak to Pension Wise.
“That leaves huge numbers of people at risk of making the wrong decision about accessing their pension savings—risking a lower quality of life in retirement and, in the worst case scenario, losing all of their pension savings to scammers.
“The approach the Government has outlined today is a step forward.
“Even on its own evidence, though, it seems unlikely to deliver a really major increase in the numbers of people who take guidance from Pension Wise.”
Currently, the pension schemes bill is in its committee stage in the House of Commons.
There will then be another two stages to get through before any amendments are considered.
Pension Wise itself is an impartial guidance organisation that can help people better understand their pensions and options.
Bookings can be made with the organisation over the phone or online and a specialist will go through a person’s pension options in an appointment lasting around an hour.
To book an appointment, people will need to be aged 50 or over and have a UK-based defined contribution pension.
Pension Wise does not provide guidance on defined benefit pensions (also known as final salary schemes) and if people need help with them, they will need to go to the Pensions Advisory Service instead.
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