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Default pensions guidance needed, new research finds

Nearly 90 percent (86) of individuals believe employees should not be defaulted into a decumulation pathway at retirement without financial guidance, new research has found.

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'There’s a danger that freedom and choice in pensions will be destroyed'
'There’s a danger that freedom and choice in pensions will be destroyed'

A poll by WEALTH at work, a provider of financial education and guidance, ran between July and November 2018 asking: “Do you believe that employees with a defined contribution scheme should be defaulted into a decumulation pathway at retirement without financial guidance?”

 

The organisation said its results support the stance of Nicky Morgan, chair of the Treasury Select Committee, who recently called for the introduction of default guidance before individuals are allowed to access their pensions.

 

Jonathan Watts-Lay, director at WEALTH at work, said: “Defaulting individuals into something without a positive choice being made raises questions over if it is actually within the pension provider or the member’s best interest. Many will argue that it’s a win for the provider because they keep hold of the member’s assets but it may not be a great option for the member.

 

“Not only this, there’s a danger that freedom and choice in pension will be destroyed if individuals don’t make active choices at retirement. It also discourages shopping around, which again suggests the winners are the providers. Additionally, as many retirees will have more than one pension, if they all default based on individual pots rather than the collective value, the likely outcome for many will be sub-optimal and less income at retirement.”

 

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