Pension providers are failing to ask their customers how they will choose to access their pensions, despite the government wanting them to ask if they have received ‘appropriate’ advice.
The Financial Conduct Authority (FCA) says that up to 70% of people have not been asked what they will do once they have accessed their pension pots.
Just 2% of those surveyed said their provider had asked them about their options and 67% said they had not had advice on what to do about accessing their savings from an advisor at their pension provider.
Of those who had not taken any advice, 40% said they felt confident enough to make their own decisions and 10% said they either couldn’t afford or did not want to pay an advisor’s fees.
The Works & Pensions Select Committee have expressed concern about the growing number of frauds robbing victims of their savings and called for automatic advice to be given as part of the Financial Guidance and Claims Bill.
The Department for Work & Pensions (DWP) believes fraudsters have stolen more than £43 million from UK pension pots since the rules were changed, calculating the average loss at £15,000.
The demand for automatic advice was later watered down. An amendment to the bill now requires providers to ask their customers if they have received ‘appropriate’ pensions advice or ‘appropriate’ independent financial advice.
If the customer has received neither the provider must recommend they do so and then ask if they want to wait until it is received before access their savings or if they want to go ahead without any advice.
Pensions minister Guy Opperman has said he hopes to have a single financial guidance body established by the winter.
It will combine the work of the Money Advice Service, Pensions Advisory Service and Pension Wise. Responsibilities will include the development of a national strategy on guidance and giving people free, impartial advice.
Said Mr Opperman: “My job is to ensure British people fall in love with pensions and the concept of saving. Between 2014 and 2024 the UK will have 200,000 fewer people aged 16 to 49.
“However, 3.2 million more people will be aged 50 or over and so we have to respond to these demographics.”
The FCA report also found savers are so keen to take advantage of the pension freedoms that they are not considering drawdown alternatives.
The report said: “As consumers’ main focus is accessing their tax free cash they have not thought about the investment choices within drawdown. This had led some customers to staying in cash funds meaning they have a greater risk of running out of money.”