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51% of Britain’s largest employers are not confident Pensions Wise will provide their employees with adequate support around decisions at retirement
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The decisions people need to make at retirement will be so much more complicated from April. People need advice but only 22% of consumers are willing to pay for it
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As a result Britain’s employers fear a backlash against them if they fail to support employees with decision making at retirement
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It’s not just those at retirement that need support. People can start taking money from pensions from age 55. There needs to be guidance in place for them
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There’s a real risk that people who have saved conscientiously for decades will overspend out of ignorance
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48% think employees will hold their company responsible if they make poor decisions
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HR Directors believe their workforce is just as likely to look to their company (63%) as to the government (62%) for retirement guidance or advice
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80% of HR Directors believe employees will expect some help from their employer
The lack of confidence in the new guidance service is compounded by the fact only 41% of HR Directors believe that employees are willing to pay for advice.
Rona Train, Partner at Hymans Robertson, explains:
“It’s very difficult to see how Pensions Wise will be able to give people the support needed to understand the range of options and the tax implications of any decisions they make. In that context, we’re surprised that around half of the UK’s biggest employers are confident it will be adequate.
“We agree with comments made by the ABI recently that a worrying amount of information regarding the guidance service for consumers is missing. We are entering unchartered territory and the details are not as clear as you’d hope. This is not surprising given how little time the industry, employers, regulators and even the government itself has had to prepare for what are the most sweeping changes to the pensions industry we’ve seen in our lifetime.
“In our view the two biggest issues are the quality of the guidance Pensions Wise will offer and the lack of support in place for people age 55+ that can start drawing on their pension. The risk is that people will start eating through pension savings only to find they don’t have enough to retire when they want to.
“Individuals need advice, but they don’t value it, and certainly not enough to pay for it. Research we conducted last year showed that 57% of people would ensure that they make the right decisions by ‘doing it themselves’. Only 22% said they’d be willing to pay for external advice and of those they are only prepared to spend on average just £37 for it.
“There appears to be a perception that people will be able to treat pension schemes like bank accounts from April – drawing money as and when they please. The picture is far more complicated than many realise, particularly from a tax point of view. It
certainly won’t be as simple as most people expect.
“For the pension freedoms to be a success there needs to be better guidance in place, both pre- and at-retirement, to ensure people don’t run out of money. Greater support is needed to help people make the right choices in the face of much more complexity. Low cost online tools definitely have a role to play.
“People need access to better tools to help them understand their own personal circumstances. They need to be able to appreciate the impact of withdrawals from their pension schemes – particularly in relation to when they’ll be able to retire with an income that’s adequate – and then what levers they can use to get back on track.”
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