Christopher Brooks: Should employers default staff into pensions guidance?


Pension freedoms have opened up a brave new world of financial decision-making. While this can be a positive, a typical individual accessing their pension is now expected to make decisions that balance present and future spending needs, while factoring in information about complex products of which they have no previous knowledge.

This inevitably leads to difficult decisions, and people are likely to need a guiding hand. Three and a half years on from the introduction of the pension reforms, however, and we are still in a position where too few people are receiving the support they need; this is a gap employers can help fill.

The latest Pension Wise user survey, published by the Department for Work and Pensions (DWP) in November 2018, confirms that the vast majority (93%) of service users were either very or fairly satisfied. The drawback of Pension Wise, which offers free and impartial guidance around pension freedoms, is simply that not enough people are using it. The Financial Conduct Authority’s (FCA) Retirement outcomes review: interim report, published in July 2017, estimates that as few as 10% of those who are accessing their pension pots also had a Pension Wise appointment.

Since consumers find pensions guidance helpful, it seems logical to extend its reach. This will not happen by itself. Age UK has, therefore, argued for a system of defaulting people into the service, with the option to opt-out should its support not be required. We are hopeful the government will bring this into effect next year.

However, there is a clear role for employers, too, many of which want to help their staff make better choices. There is scope to facilitate impartial, independent guidance, either through Pension Wise or, where skills and capacity allow, in-house. This can help smooth employees’ retirement decisions and get the most out of pensions, a challenge even for the savviest consumer.

Christopher Brooks is senior policy manager at Age UK