At The Pensions Advisory Service (TPAS), we believe that automatically arranging a guidance session for employees at the point when they start to think about taking their benefits is essential in order to make seeking help with pensions the social norm.
Currently, a vast majority of people are retiring with some defined benefit (DB) pension provision; therefore, the decisions that they have to make are limited and not material. This will not be the case for much longer. In 10 to 15 years’ time, a high proportion of pensioners will be relying on their defined contribution (DC) pensions to provide a significant part of their retirement income.
People need help in understanding the impact of their decisions. From the experience on our helpline, receiving pensions guidance needs to be the default option in order to overcome some of the barriers that stop people getting help currently. These barriers include employees not knowing that they need help, not knowing where to get it, thinking that their pension pot is too small for it to matter, embarrassment that they may ask a stupid question, or having had a bad past experience of being sold a product that they did not want.
Organising a guidance session as a default option for staff makes it easier for people to attend, which fits with the adage that good design should be frictionless. People can cancel the session if they do not think they need it, but most will welcome the offer for help, and will be aware that there is nothing to lose by talking to a pension specialist.
Over time, the success of the service will be that it becomes the social norm to seek pensions guidance, so employers will no longer have to default people into it.
Michelle Cracknell is chief executive officer at The Pensions Advisory Service (TPAS)