The removal of an amendment making pensions auto guidance compulsory under new legislation has been welcomed by a pension provider.

The government has removed the amendment to the Financial Guidance and Claims Bill currently going through Parliament which automatically enrolled people taking benefits under the Pension Freedoms into guidance.

Providers will now be required to ask customers looking to access the freedoms or transfer whether they have received appropriate financial advice once the bill becomes law.

Should they state they have not received guidance then the provider must recommend they seek guidance, or ask members whether they would like to receive guidance before accessing their pot or proceed without it.

Tom Selby, senior analyst at AJ Bell welcomed the move, he said: “The new amendment is a vast improvement and in the short-term should help increase awareness of the importance and value of advice and guidance.

“It also gives the FCA breathing room to consult on alternative nudges towards guidance that have been shown by research to be effective.”

The previous auto guidance rule was a source of delay for customers he said: “Automatically enrolling members into guidance for each transfer or every time they took money from their own pension pot – when they have already decided what they want to do – would have caused massive delays and huge complaints.

“Furthermore, it was by no means clear that it would have a material impact on the take-up of guidance. It therefore risked being both infuriating to customers and ineffective.”