An amendment to the Pensions Schemes Bill which would have seen people given a pre-booked Pension Wise appointment ahead of accessing their retirement savings has been defeated.
The amendment was tabled by work and pensions committee chair Stephen Timms ahead of the yesterday’s House of Commons debate on the bill. It was co-signed by Conservative and SNP MPs, giving it cross-party support.
Supporters include Nigel Mills, Richard Thomson, Neil Gray and former pensions minister Angela Eagle.
However, the amendment was defeated by 89 votes.
Speaking during the debate, Timms said the amendment had been tabled to increase the numbers of people taking guidance when accessing their retirement savings using pension freedom, which revolutionised pensions access when then-Chancellor George Osborne announced it in the 2014 Budget.
Osborne promised anyone who wanted free, impartial guidance would have it as he swept away the effective requirement to buy an annuity at retirement.
Timms told the Commons last night (16 November): “The outcome of George Osborne’s promise is the Pension Wise service operated by Citizens Advice, and it is an excellent service. It is free and it is impartial, as George Osborne promised, and it gets very high satisfaction ratings from those who use it. The problem is that hardly anyone does use it.”
He added the amendment would fix a “serious flaw” in the current system. However, the proposed change was voted down.
The amendment would have “ensured members of pension schemes receive a Pension Wise appointment prior to accessing their pension”. Further appointments would have been booked yearly until taken up or a confirmed opt-out was received.
Appointments would have been first scheduled five years ahead of their retirement date.
AJ Bell senior analyst Tom Selby said: “Increasing take-up of retirement guidance is the right goal and one which is shared across the pensions industry.
“Pension freedoms have opened up huge flexibility to savers but also present difficult and often complex choices, from understanding the tax rules to managing withdrawals sustainably. With the majority of people choosing to make retirement decisions without advice, guidance has a pivotal role boosting people’s understanding of the retirement landscape.
“However, there has been debate about the most appropriate time to point people towards guidance, with some arguing for a ‘nudge’ and others preferring an auto-enrolment ‘shove’.”
He added: “In the event, the government decided to stick with its ‘stronger nudge’ plans and rejected Labour’s amendment, which would have required the DWP to automatically enrol members into a guidance appointment from their 50th birthday. In addition, Labour’s proposal would have required an appointment be rebooked each year until guidance had been taken or the person had chosen to opt-out.
“Policymakers are attempting to strike a balance here between boosting take-up of valuable retirement guidance while ensuring people who want to access their own money are not impeded in doing so.
“Creating a system to book guidance appointments on behalf of millions of people would also have been a huge administrative task which would undoubtedly have come with significant costs for the Exchequer. This likely had a significant bearing on last night’s decision given the pressures placed on public finances by Coronavirus.
“As the ‘stronger nudge’ reforms are taken forward, it will be important to consider how and when to prod people towards guidance, taking into account people’s motivations and behavioural responses at different stages of the retirement savings journey.”