Savers should be auto-enrolled into pensions guidance to increase usage, particularly among vulnerable pension savers, according to Just.

The proposal is in response to the Work and Pensions Committee’s call for evidence for its pension freedoms inquiry. It believes a more active approach promoting independent and impartial pension guidance will give savers more faith in the pension system and help them to make better informed decisions at retirement.

As a result, it believes the government’s plans to create a single financial guidance body is a good opportunity to introduce “automatic enrolment to guidance”. Just Group group communications director Stephen Lowe said: “Our view, and the one we are sharing with the Work and Pensions Committee inquiry into the pensions freedom reforms, is that guidance needs to built-in so that it becomes just another normal step in the process for most people.

“We can’t expect the passive communications of pension providers to drive guidance usage to acceptable levels, instead we need a more radical, transformational change to the government’s policy. We think that is auto-enrolment into guidance. Pension Wise is highly recommended by all who use it, but too many are missing out. This greatly increases the risk of customers making uninformed decisions that can lead to years of lost benefits, and maybe even losing life savings to scams or fraud.”

Just said the modification in policy required to create a step-change in guidance usage draws upon the success of pensions auto-enrolment, and has two components. Firstly, people should be actively encouraged to receive guidance from age 50, which is five years ahead of the age when people are eligible to access their pension savings.

Secondly, people who have not received guidance or regulated financial advice, and who make a request to access their pension savings, will be automatically enrolled into the free, impartial government guidance service. This second stage acts as a backstop, a protection measure for people who have not accepted invites to engage with the service in the five+ years prior to this point.

“It is already a requirement for mortgage customers to take regulated advice so why are pensions a free-for-all?” Lowe said. “Research we carried out recently found that more people were confident making mortgage decisions than pension decisions and most thought guidance or advice should be a requirement when taking pension benefits.”

He said that making guidance the default option would be consistent with other areas of pension policy, such as auto-enrolment into workplace pensions that has dramatically increased the numbers saving towards retirement.

“We have been keen to share our thinking on potential solutions with the committee, including the need to deliver positive new norms around pension access while freedoms are still at an early stage.”

Share Story: