Pension providers will need to significantly reduce the size of pension ‘wake-up’ packs, as well as increase their frequency, from this Friday (November 1).
This is a new rule put in place by the Financial Conduct Authority (FCA). Currently, pension ‘wake-up’ packs are provided to customers when they are due to retire.
The new rule means pension providers must send out the packs once the individual reaches the age of 50 and then every five years after that until the pension is fully cashed in.
Providers will also need to send the packs just before someone retires, whenever they request a retirement quote and any time they take money out of their pension - with no more than five years between each pack.
Jonathan Watts-Lay, director at financial education provider WEALTH at work, said the new packs will be different in that they have to include a one-page summary of the pension, information on how to access the government’s Pension Wise service for guidance and an explanation of the advantages of shopping around when purchasing a retirement income option alongside how to do this.
He said it will also need to include a single page identifying the main risk factors relevant to these options and highlight warnings in relation to each of these risks. This will take into account an individual’s age, proposed retirement date and amount of pension savings and will cover things like tax issues, pension scams and investment risk.
Watts-Lay added: “Freedom and choice in pensions, giving individuals the right to do what they want with their pension, has been very popular. However, in practice, without the expertise of how to manage this, it can be easy for employees and pension scheme members to make poor decisions which can lead to a permanent dent in their retirement income.”