“It leaves a bitter taste that, just a day after the FCA published research showing large numbers of those planning to access pensions are struggling to understand their choices, the legislation is reaching its final stages in the Commons without strengthening the existing guidance framework.
“Treasury Minister John Glen last night said the Government believed the Bill would ‘lay the foundations for an effective final nudge’.
The truth is that we’ve already had four years of laying foundations and it’s time we built the house.”
He drew parallels with development of the pension passport and said that there is a danger that testing and pilot schemes become excuses to delay taking action. “While government tries to work out what works best, millions are making key pension decisions they could easily end up regretting,” he said.
The Financial Conduct Authority on Monday released figures from the Financial Lives Survey that raised serious questions about whether those planning to access pension money soon had sufficient understanding of their retirement options.
Of those who said they had a clear plan to take pension money, 98% said they understood their options either very well or to some extent. Yet only just over half (54%) of those planning to take money in the next two years knew that an annuity would give a guaranteed income for life. Given a series of questions about income drawdown, half (50%) of those aged 55-64 answered them all incorrectly, and for UFPLS six in 10 (61%) got all the answers wrong.
“Most sobering is that the FCA recognises more than half the people in its research as ‘potentially vulnerable’,” he said. “This is a large group that displays a significantly lower understanding of the options than the average. Including default guidance in the Bill could have had a big effect on ensuring they received the support they need.
“We are disappointed that there was no time for MPs to debate this important point but are hoping this key consumer protection will be achieved when regulators set the detailed framework for pensions guidance. We don’t want to be here in another four years wondering why so many people who are ill-equipped to make complex decisions are effectively going it alone."
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