What are people learning?
Government backed ‘Pension Wise’ is the most popular option for employees seeking guidance around the new pension reforms, but businesses need to ensure they are clear about what it can offer their staff – and at the moment, there is too much confusion.
It’s been more than four months since the pension reforms were introduced, entirely changing how people can access their retirement savings but adding a huge amount of complexity into the mix. In anticipation of this, the Government launched Pension Wise as a free guidance service for those seeking advice on their new retirement income, and following the summer budget this was expanded to include those over the age of 50. Prior to launch, however, there were doubts about whether this new service would be able to deal with the high level of enquiries expected, and also as to its ability to provide the detailed guidance necessary. So what is the response to the service now it has been in use for some time, and is there enough clarity about what it can offer?
Our latest research has found that Pension Wise is in fact the most popular option for those seeking guidance about how the pension reforms will affect them. Employers found that 19% of their staff were turning to this service, compared to 17% going to financial advisers and 18% to employers themselves. What’s encouraging is that people are clearly engaged and actively seeking advice when it comes to how to adapt to the changes. However, it’s a concern that there is confusion amongst employers about what support Pension Wise can actually provide, and the research revealed that this is the case for almost a third (32%) of businesses.
Employers need to be well-informed
If employers are going to be directing staff to external support services like Pension Wise, it’s vital they understand exactly what they are pointing them towards – most notably, that the guidance it gives is not advice, and so should sit alongside financial advice rather than competing with it. If they don’t understand this, they could simply be adding to their staff’s confusion.
Directing staff to Pension Wise should not be the total sum of support that employers provide, and education – on both sides – is the key to helping employees navigate the freedoms now available to them. What’s positive to see is that over a third (37%) of employers said the pension reforms had encouraged them to play a greater role in financially educating their employees. One in five (23%) admitted they didn’t have the right provision in place. But it doesn’t have to be a strain on resources. A financial education programme – whether this is through seminars, online, clinics or one-to-one advice – can help build up understanding and engagement and lead to employees taking action to improve their own financial wellbeing. In turn, companies will benefit from better staff morale, retention rates, and even productivity.
We don’t yet know what further changes to pension policy there will be, so taking small steps to help staff understand their wider choice and make sound, informed decisions will benefit them and their employers.