‘Nudge’ beats a wink for pension customers who would benefit from more guidance
26th May 2022 13:45
by Rebecca O'Connor from interactive investor
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Our head of pensions and savings comments on a new idea and says that many people tend to have a passive approach with their pensions and need some momentum to get going.
From 1 June, pension providers must offer to book a free financial guidance session with Pension Wise for customers who contact them to access their pension fund or transfer between schemes ahead of accessing their pension.
Importantly, customers can opt out if, for instance, they already have a financial adviser. Or they can book the Pension Wise session for themselves.
Becky O’Connor, Head of Pensions and Savings, interactive investor, the pensions and investments platform, said: “There has arguably never been a harder time to retire. With stock markets looking decidedly unpredictable and inflation at an alarming level, today’s crop of soon-to-be retirees may feel stunned into inaction.
“The Pension Wise service can help people to at least understand their options and feel more confident about what to do next. It is a useful guidance service for the hundreds of thousands of people who approach the age they can access their private or workplace pension savings every year, but who are not sure what to do with it at that point. The service doesn’t offer tailored advice following a review of all of someone’s finances in the way an adviser would, but it fills an important gap and has been underused to date.
“A nudge towards it should be much more effective than a wink – many people tend to have a passive approach with their pensions and need some momentum to get going. Time will tell if more people use the service and experience better retirement outcomes as a result. The opt out is an important feature though – not everyone will need or want the service.”
Why some people need a helping hand with pension access
“Many people currently approaching retirement have several past schemes, some of which may be defined benefit and some defined contribution, with different rules and restrictions attached, so knowing what to do can be very complicated and hard to navigate on your own.
“At the same time, many retirees cannot afford or may not want to seek independent financial advice. There remains a risk that in not knowing what to do, people make decisions that put their retirements at risk, such as transferring their pension pot to cash rather than leaving it invested for growth. So this service is really crucial, can help people save and make more money to put towards their retirement and take-up does need to improve.
“We are happy to have launched the ‘stronger nudge’ to interactive investor customers and hope more people can benefit from the service.”
Notes to editors
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