Aegon and Standard Life Aberdeen have flagged risks surrounding the FCA’s pensions nudge proposals, warning that it may detract from financial advice and result in poorer outcomes for individuals.
The FCA consultation ‘A stronger nudge to pension guidance’ proposes making sure consumers have either received or opted out of receiving Pension Wise guidance when applying to access their pension savings.
Under the new proposals, pension providers would need to explain the nature and purpose of Pension Wise guidance and encourage the consumer to take the guidance.
However, Aegon hailed the proposals as “too skewed” towards promoting Pension Wise, warning it could detract from other forms of support which might better serve customers.
Steven Cameron, pensions director at Aegon, said: “While Pension Wise is an important service, offering valuable guidance to many thousands, the FCA proposals place too much emphasis on promoting Pension Wise guidance, rather than presenting this neutrally as one of a range of support options.
“We strongly believe the benefits of seeking regulated financial advice should be given at least as much prominence, with any guidance services offered by providers also signposted. This would allow consumers to make an informed choice based on their needs and the likely costs.”
Cameron said firms offer valuable ‘in house’ information and guidance support which can be designed and implemented to be impartial and help customers make the most of product features.
Cameron added: “It’s particularly controversial for the FCA to be proposing even customers who have already taken financial advice on retirement options to still be nudged to Pension Wise. In many cases, the adviser may be supporting the customer in implementing their decision to access. While customers can opt out, requiring providers to nudge to Pension Wise in these situations could be seen by customers as the provider questioning the adviser’s recommendation.
“We envisage more personalised guidance support becoming increasingly expected of firms under the FCA’s new consumer duty proposals and again should be signposted alongside the other support options.”
Alastair Black, head of platform proposition at Standard Life Aberdeen, echoed the sentiment.
Black said: “We are supportive of non-advised consumers being given stronger encouragement to go to MAPS for guidance. Of course while we know advice will always give a better outcome, we also know guidance is realistically the only option available for many.
“A key measure of success for a stronger nudge approach should be ensuring we see more people achieving better outcomes via guidance, while at the same time a greater number taking advice.
“We think there is a risk that, if this is not handled appropriately with suitable rules from the FCA on how this should be delivered, that we may see this shift in the wrong direction away from advice, resulting in poorer outcomes for many.”
Black said that by telling consumers about free impartial guidance or advice they have to pay for, the FCA risks creating a bias away from advice if consumers are unaware of the value it could offer.
Black added: “Consumers should understand that with guidance via Pension Wise they’ll still have to make their own decisions. If they can pay for financial advice they have the opportunity to discuss and agree with an expert what would be best for their individual circumstance.”
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