Speaking at the Financial Guidance and Claims Bill’s first reading in the House of Commons on Monday, Guy Opperman, Pension Minister, said the government supported the need for default guidance at retirement but did not give a firm commitment to make it mandatory.

Commenting on the support for guidance, Malcolm McLean, senior consultant at Barnett Waddingham, said the use of retirement advice needs to be more encouraged.

He said: “I can see the government’s dilemma here. On the one hand we know that many people benefit considerably from talking to an expert prior to accessing their pension savings and in so doing avoid some of the pitfalls associated with the new freedoms.
“Yet take-up of the Pension Wise guidance service is very low and, as the minister acknowledged, some sort of nudge to encourage more use of the service is definitely needed.

“I suspect the nudge approach will ultimately carry the day here. A full mandatory requirement to take guidance would not be popular with savers, would slow things down and would be extremely costly in respect of the resource needs of the new guidance service.

He said guidance needs to be better promoted to attract users.

He said: “A more pragmatic approach would be to be more upfront and explicit - promoting the value of guidance whilst emphasising the risks and consequences of getting it wrong. Savers could also be asked to sign an acknowledgement that they had been offered of a guidance session, but did not wish to proceed with it, prior to accessing their pension pot under the freedom arrangements.

“We shall find out which way the government intends to go in due course.”