A recent government report has branded the current pension advice system a ‘failure’. It warns that the government needs to take a more active role in helping people who are worried about retirement.
Many people nearing retirement currently don’t get pension advice. In fact, only 14% of people accessing their pension pot for the first time have used the free Pension Wise service. The committee that prepared the report says the government should aim to boost Pension Wise usage to 60%.
In this article, I take a look at how the government has failed to publicise the Pension Wise service, how the advice system works and whether you could benefit.
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An expert view on retirement advice
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, says that “we need a new approach” to pension advice. She argues that many people are accessing their pension “without the support of guidance or advice.”
She stresses that “there are many tools that people can access” but that “they remain under-used and scattered”. Helen adds that “only around 14% of people who could be making use of Pension Wise are actually doing so,” and she feels it’s mainly because “people don’t know these services exist, never mind how to access them.”
Free pension advice
Many people are worried about retirement and don’t realise they can get free financial advice on their pension options.
Pension Wise is a free government service from MoneyHelper that offers impartial pensions guidance about what to do with your pension pot.
You can make a free appointment with Pension Wise to discuss your financial situation and your pension options to help you make the right decision. You can also find out about any other factors you need to consider when setting up your pension for retirement.
The government needs to publicise the service
The Work and Pensions Select Committee has called on the government to do more to publicise the Pension Wise service. The committee argues that it would boost access to guidance for people taking a retirement income for the first time.
Only 14% of people in the UK who have accessed their pension used the free Pension Wise service to help them plan for retirement. And that’s largely because most people don’t even know the service exists. The Work and Pensions Select Committee report says that the government should aim to boost the use of the Pension Wise service to 60%.
It has recommended two trials:
- Offer Pension Wise appointments automatically to people nearing retirement
- Offering appointments to people at age 50, with the option to opt out.
The committee also looked at whether a more enhanced guidance service can be offered to support people more.
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Are the government’s pension plans enough to help those nearing retirement?
According to Helen Morrissey from Hargreaves Lansdown, “The committee’s plan to make Pension Wise appointments automatic goes a step beyond current plans.” However, plans may come unstuck because “there is also the chance that people still decide not to take up their appointment”.
Helen adds that another option might be to offer an “enhanced guidance service”. Pension Wise could signpost people to resources that are a bit more personalised to their individual needs.
She explains, “Providers have been prevented from offering such services for fear of being seen to be straying into advice. Being able to develop such a service could potentially really help people “get to grips with their retirement options more and ensure they make good decisions.”
