Retirement savers over the age of 55 would be automatically enrolled in an orientation session before gaining access to their pension fund, as part of measures supported by a member of the board of directors of the Financial Rescue Scheme. UK.
Savers who are considering drawing into their pension funds for the first time are currently being informed by their providers of the benefits of free 45-minute support with Pension Wise. The provider also offers to make an appointment for them.
But so far, only one in five of the 430,000 savers who access pension funds each year without advice make their free appointment at Pension Wise. Since 2015, around £ 10 billion has been lost to pension scams, according to estimates by the Pension Scams Industry Group.
Pension Wise was introduced in 2015 when barriers to accessing the pension fund were removed for those over 55, sessions aimed at helping savers understand retirement income options and avoid scams by investment matters.
Speaking at an industry event on how to tackle retirement scams, Richard Parkin, a non-executive board member of the Financial Services Compensation Scheme, the financial rescue fund, said that people should be automatically signed up for a Pension Wise appointment before accessing their money.
“Requiring people to have followed or actively opted out not to, before accessing retirement savings, has always made sense to me,” said Parkin, whose organization pays compensation to clients of the financial companies in bankruptcy.
“At the very least, subjecting people to a process of considering advice would provide another opportunity to highlight the prevalence of scams. Investment scams are included among the risk factors providers face with clients accessing their retirement savings, but in my experience these risk warnings often do not actively engage clients. consumers and are seen as a barrier to overcome in order to access the benefits. ”
Parkin’s appeal, which was made in a personal capacity, comes amid skyrocketing compensation payments by the scheme, in part driven by pension scams that are causing more business failures among consulting firms following complaints about their recommendations. The FSCS has forecast that its compensation tax will rise to more than £ 1bn in the current fiscal year, from £ 700m the year before.
The FSCS said it had no official position on Pension Wise but welcomed constructive proposals on how laws and regulations could be improved to protect retirement savers.
Stephen Lowe, director of pension specialist Just Group, has supported stricter measures to ensure that more savers benefit from the advice of Pension Wise.
“Steps taken so far to boost the use of Pension Wise, such as TV commercials and wording change for wake-up packs, have not worked,” he said.
“Achieving the government’s goal of making guidance the norm will require a bold and ambitious transformation. Fortunately, we already have a model – automatic enrollment in occupational pensions – to show how big improvements can happen without constraints. “
Last year, the government acted to boost adoption of Pension Wise by giving savers a “stronger push” towards guidance. Providers should offer to book a Pension Wise appointment for clients, who can then opt out.
The Ministry of Work and Pensions rejected the call to go further.
“This government is committed to ensuring that people have the support and information they need to make informed choices about their financial future,” said the DWP.
“A stronger boost will ensure that providers present counseling as a normal part of accessing your pension, and they will book a Pension Wise appointment for the individual unless they wish to opt out of receiving counseling.” advice.”