Should retirees be compelled to get advice before taking their pension?
Those with a DB pension or guaranteed annuity rate and benefits worth £30,000+ must take regulated advice before they can transfer, but should compulsion extend to all retirement savers accessing their pot?
Education – not compulsion – is the key for Jamie Smith, Partner at Foster Denovo. “It is important that advisers engage positively with consumers and that is often best done through education about the risks of missing out on pension income,” he says. “Simply compelling people to seek advice may be perceived as a negative approach.”
By August 2020, the Financial Conduct Authority wants providers to offer ‘investment pathways’ to non-advised consumers at retirement – an approach that should lead to better outcomes for this cohort.
While making the right decisions at retirement is crucial, Jamie says more must be done to encourage people to seek advice while they are working and accumulating to ensure they are also making the right choices along the way.
“Making poor choices earlier on can also have a significant impact on the size of the pot at a later date and the amount of pension income,” he says. “Education and encouraging people to undertake mid-life reviews at this earlier stage of their journey is going to be key and will require industry wide buy-in.
“We are already seeing positive steps taken, with more and more organisations developing workplace financial wellbeing programmes to support and educate staff.”
Read the full article on Advice Matters here.