Pension guidance: DWP launches plans to help savers avoid ‘serious financial consequences’
Rishi Sunak grilled over plans for 8% pension rise
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Pension savers, at the moment, must be directed to Pension Wise by their scheme providers when they want to access their savings. However, today the DWP set out new proposals to require more stringent checks down the road.
The DWP explained: “New ‘Stronger Nudge’ rules set out today, propose requiring trustees and pension scheme managers to make sure the individual has either received – or opted out of receiving – that Pension Wise guidance, before proceeding with their application.
“Pension schemes will also be required to offer to book a Pension Wise appointment on the individual’s behalf.”
Guy Opperman, the Minister for Pensions, commented on the changes.
Mr Opperman said: “It is vital that savers have the support they need when making decisions about their pension pots that could have serious financial consequences for them in later life.
“Pension Wise is a fantastic service that offers free, impartial guidance and so I want to see as many people as possible using it.
“This change is vital in preventing savers from failing to take advice and increasing the take-up of the guidance that is available.”
The DWP detailed where individuals do not wish to take up the offer of a Pensions Wise appointment, the Government proposes they specifically opt out via a separate communication with the scheme, although some exemptions would be in place.
Pension Wise itself provides free, impartial, guidance to help individuals aged 50 and over with a defined contribution pension, understand the options available to them.
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Guidance of this nature may be more crucial than ever as recent data from Action Fraud showed pension scam victims are losing an average of £50,000, double last year’s figure of £23,689.
Additionally, research released in early July from the FCA detailed scammers have targeted over £2 million worth in pension pots in the last five months alone.
The FCA warned pension holders are nine times more likely to accept advice from someone online than they would from a stranger met in person.
On top of this, they are five times as likely to be interested in a free pension review from a stranger online than someone in their local pub.
In light of these findings, Mark Steward, the FCAs Executive Director of Enforcement and Market Oversight, urged retirees to be aware of digital risks.
He said: “Imagine a stranger in a pub offering free pension advice and then telling you to put those savings into something they were selling. It is difficult imagining anyone saying yes to that.
“It’s no different online. Whether you’re on social media or checking your emails, if someone offers you free pension advice, ‘flip the context’ and imagine them doing the same thing in real life. Stop and think how you would react.
“Fraudsters will seek out every opportunity to exploit innocent people, no matter how much they have saved.
“Check the status of a firm before making a financial decision about your pension by visiting the FCA register. Make sure you only get advice from a firm authorised by the FCA to provide advice, before making any changes to your pension arrangements.”
Emma-lou Montgomery, an associate director for Personal Investing at Fidelity International, also provided additional guidance on this.
Ms Montgomery said: “Fraudsters have no shame when it comes to parting people from their hard earned money and life savings can disappear in the blink of an eye. Scammers have successfully made off with over £2 million of people’s pension savings in just five months, that’s nearly £15,000 every single day.
“The prevalence of scams has only worsened through the pandemic with unscrupulous individuals taking advantage of market volatility and uncertainty to draw people away from trusted firms. Employing increasingly sophisticated tactics, scams can be difficult to spot but there are some tell-tale signs that should always raise a red flag. Pressure to make decisions quickly, the offer of free money or something that seems too good to be true are clear warning signs.
“If people are looking to make changes to their pension arrangements, they have to be cautious and do it the safe way. If they are unsure, thorough research and seeking advice from an impartial source, such as a regulated financial adviser, are both incredibly important. Only then, once people have all the information for their specific needs and circumstances, should a decision be made.”
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