Two-thirds distrust pension providers to offer guidance

The offer of free, face-to-face guidance will be introduced as part of a package of radical Government reforms to introduce more flexibility and choice around what people do with their pension savings.

But 65 per cent of people surveyed by Which? said they would not trust the pensions industry to deliver this guidance, while 63 per cent said they would have faith in such guidance being put in the hands of an independent body such as the Pensions Advisory Service.

The Government is still fleshing out details of exactly who will provide the guidance, but Pensions Minister Steve Webb recently said it will be to a requisite standard and content. The Government has been discussing the plans with independent advice bodies like the Money Advice Service (MAS).

The guidance will coincide with radical reforms being introduced from April next year, which mean people aged 55 and over will be given the freedom to take their pension pot how they want, subject to their normal marginal rate of income tax. Previously, people have been charged 55 per cent tax if they withdraw the whole pot.

The shake-up is expected to spark a flood of new, more innovative range of retirement products onto the market and lead to fewer people converting their pension savings into an annuity when they retire, which gives them a fixed yearly income, usually for life.

Controversy over annuities has been growing amid tumbling rates in recent years and fears that people are not getting the best deal they could by shopping around. Up until now, around 400,000 people a year have bought an annuity.

Which? surveyed more than 1,000 of its members, made up of both people who have retired and those who are still working. Seven in 10 agreed that people should be able to do what they want with their pension savings.

The consumer group’s executive director Richard Lloyd said: “With many unsure about how to get the most from their pension, and not trusting guidance from providers, it’s crucial that everyone involved – the Government, advice agencies, the industry and the regulator – put in place a consumer-friendly system that supports people to make the right decisions.”