Legal and General has called for regulated personalised guidance to be introduced to help savers understand their retirement choices and close the pension inequality gap.
It said pension providers are not able to directly alert customers to financial solutions that might be better for them due to current regulatory restrictions.
L&G added more needs to be done to help prompt and nudge customers to make decisions tailored to their circumstances.
The retirement specialist said it welcomed the Financial Conduct Authority’s recent statement on carrying out a review of the boundary between advice and guidance.
But it wants to see changes to the rules to help savers make better informed choices.
L&G made the call on the back of latest government announcement on private pension reforms aimed to improve fairness and protection for people saving into a workplace pension.
Last month, pensions minister Laura Trott told an audience at the Pensions and Lifetime Savings Association about new measures to help close the pensions inequality gap.
She said: “Alongside a record number of workplace pension savers and assets, there’s more choice and more freedoms. But with more choice, comes increased variability in terms of the retirement outcomes that schemes are delivering for savers.
“More freedoms put more decisions into the hands of individuals to make. As scheme members, many feel they are navigating through a hugely complex financial world. There is more that we can do to help. My plans for reform focus on three pillars. Increasing are fairness, adequacy and predictability.”
Another raft of measures announced by the government include consultations on a new framework for assessing Value for Money for workplace schemes.
And extending the framework for collective DC schemes and confirmation that the regulations for excluding performance fees from the charge cap will take effect from 6 April this year.
Legal & General head of product policy strategy Colin Clarke said: “It’s fantastic that the minister for pensions has confirmed the removal of performance fees from the charge cap. This opens the door to more opportunities for schemes to improve outcomes for members and democratise investments.
“The issue isn’t that people are only saving ‘just enough’ to get by in later life. It’s the fact they aren’t saving enough but don’t realise it, so are under a false impression about the state of their retirement.
“We all need to help savers understand their pension choices and improve engagement levels. These factors have always been important, but against the backdrop of rising living costs they are now critical to help boost pension adequacy in the UK.”
L&G said it also want to see a review of auto-enrolment and a greater focus on engagement efforts.
It said while auto-enrolment has been a success, industry and government should ensure it does not “inspire false confidence” and that savers see their workplace pension as part of the overall picture which makes up their retirement.
It also calls for a timetable for implementing AE changes so as to give providers, employers and members a clear timeline to prepare.
Millions more people are now saving into a workplace pension with 10.8 million workers enrolled so far and £33bn more saved in real terms in 2021 than in 2012, according to government data.
Such a proposal is all very well, but guidance, particularly regulated guidance, cannot be provided FOC and, as another current MM feature points out, most UK adults don’t avail themselves regulated advice.
Whether it’s guidance or advice, the conclusion for the great majority of people who seek out either is likely to be that they need to allocate as much of their disposable income as they can afford towards their retirement. Most are likely to be reluctant to spend money only to be told what they probably already know. All guidance will do is quantify how badly underfunded they are.
Furthermore, disposable incomes are already under increasing pressure due to the cost of living and keeping a roof over their heads.
And finally (for now) is there any particular enthusiasm in the regulated adviser community to supplement a service that Pension Wise supposedly already provides?
I’m all for helping people to understand their options but NOT if it is mandatory and there’s a charge. Maybe it’s only a few but some people are more than capable of making their own decisions. There are also some that are determined to go it alone and fully accept the risk that they might get things wrong! So, let’s have lots of help but ONLY IF YOU WANT IT.