Pensions guidance gap fuels £132bn savings shortfall

by | Feb 24, 2022

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Findings on the barriers to becoming better informed:

  • Overconfidence prevents individuals from receiving support. In the Opinium survey, the most frequently cited reason for not speaking to a financial adviser was feeling financially knowledgeable enough to take decisions without advice (28%), with this driven by men (34%) rather than women (22%).
  • Lack of awareness about what is on offer also affects usage. Barely half (47%) of those aged 55-64 have heard of Pension Wise.
  • Regulatory barriers are likely to be holding back provision of advice and guidance. Ambiguity around Financial Conduct Authority rules on (regulated) advice and (unregulated) guidance is making firms cautious of offering useful information about pensions.

Scott Corfe, SMF research director, said:

“The blunt truth about pensions is that many people don’t know enough to make the decisions that would give them the retirement they want. Poor information will mean poor outcomes for too many people.

There is a serious gap in the provision of advice and guidance around pensions, and that gap leads to real financial harm.

Lacking an accurate understanding of what they will need for the retirement they want means some people will not save enough, and end up disappointed. Not fully understanding their options on the way they use their pension savings in retirement means that some people will not make the best use of that money.”


1) Pension Wise needs to be expanded, with a broader scope and new digital tools. Policymakers should explore the case for expanding the scope of Pension Wise in two key ways. Firstly, providing tailored guidance on the level of pension savings likely to be needed to achieve a given retirement income. Secondly, allowing all of those over the age of 40 or 45 with a defined contribution pension to book a Pension Wise appointment, rather than just those over the age of 50, as at present. This would give individuals more time to correct for any inadequacies in their current retirement planning – for example by ramping up contributions into their pension pot or changing any non-pension investments.

2) Pension Wise’s online offer needs to be improved, including through the provision of “robo guidance” and “robo modelling” that provides individuals with highly relevant information and a clear visualisation of the potential impact of different options on their financial position in retirement.

3) At a minimum, the FCA should provide clearer information on its current definitions, including more concrete examples of what constitutes “guidance” and “advice”. This should include through provision of “gold standard” examples of guidance that is highly informative and actionable, without straying into advice territory.

Ideally, the FCA should go further and adopt new definitions along the lines of those suggested by the Independent Review of Retirement Income. This would see two categories of information, guidance and advice: “personal recommendation” and “financial help”, with the latter replacing everything that is not full regulated fee-based advice where the adviser takes responsibility for a recommendation. Such an approach would give organisations more confidence to offer enhanced forms of guidance without falling foul of regulation.

4) Using guidance or advice before accessing a pension should be made the default. Before accessing their pension pot, individuals should be requested by their pension provider to use some form of guidance and advice, and signpost individuals to a range of options, including online tools. As well as services offered by the pension provider, there should be signposting to Pension Wise and non-provider services, in order to build trust and give consumers choice.

Individuals would have to explicitly say that they do not want support in order to access their pot without advice or guidance.

5) The Government needs to invest significant resource into a nationwide pensions awareness campaign which brings home the need for individuals to prepare for retirement, makes them aware of the complexity of the decisions they face when accessing their pension pot and signposts them to support. It should be delivered through a partnership between government, industry and the third sector, ensuring common messaging.

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