- The Government wants savers taking a retirement income to get more help from providers when navigating often complex choices (Helping savers understand their pension choices – GOV.UK (www.gov.uk)).
- However, uncertainty over where guidance ends and regulated advice begins means providers are reluctant to step in and offer more help to non-advised savers.
- The DWP is also considering whether interventions introduced by the FCA for contract-based pensions – including wake-up packs and investment pathways – are appropriate for trust-based pensions.
- Greater consistency of regulation needed to ensure trust and contract-based pension scheme members enjoy similar levels of protection.
Tom Selby, head of retirement policy at AJ Bell, comments:
“Making decisions about how to save, invest and ultimately draw an income from your hard-earned retirement pot can be complicated.
“When it comes to taking a retirement income, for example, you need to think about whether you want a guaranteed or flexible income, or both, how much you will withdraw each year and the level of investment risk you are willing to shoulder.
“While ideally everyone would take regulated advice, this is not realistic – some simply don’t have the money and others will inevitably choose to go it alone.
“Ensuring that when making decisions these non-advised savers have sufficient support from a range of sources, including charities, MoneyHelper and their provider, is therefore essential.
“Although providers stand ready to do more, regulation remains a significant barrier. As things stand providers have to make a risk-based decision when deciding on the support to provide savers, with even relatively simple interventions risking straying over the boundary into regulated advice.
“Until this is addressed, the level of support people at all stages of their retirement saving journey will receive will be constrained.”
Regulatory inconsistency
“This call for evidence also shines a light on the slightly odd regulatory framework that exists in the UK, with ‘trust-based’ schemes subject to different requirements versus ‘contract-based’ schemes.
“As a result, you end up in a situation where investment pathways have been introduced for platforms – where they are much less likely to be appropriate – but not for trust-based schemes, where savers are often disengaged and therefore more likely to choose a pathways investment.
“Similarly, while wake-up packs need to be sent by contract-based schemes to customers from age 50, there is no such requirement for trust-based schemes. Given the choices facing members of trust-based and contract-based members are the same, it is hard to justify the continuation of these different requirements.
“More broadly we agree that, when it comes to member communications, keeping things as simple, clear and relevant for savers as possible is the right way to go. There is clearly a role for both providers and policymakers, who set certain mandatory communication requirements, in ensuring savers receive relevant information without being bombarded by complex jargon.”
