When asking pre-retirees for their views on using the service, 42% said they would either definitely or probably use the service. This compares with 27% who said they would be unlikely to or definitely wouldn’t use the service, leaving 31% who don’t know whether they will or not.
Andrew Tully, Pensions Technical Director, MGM Advantage commented:
"The industry will need to work hard to encourage people to access the guidance service once launched. We know from our experience of the open market option for annuities that overcoming inertia plays a crucial role in getting the best value from your retirement savings, so this service will need to be carefully marketed to make it in any way effective. As around half of retirees simply rolled over into an annuity with the holding provider in the old world, it was clear parts of the market were not working properly. But if many continue to roll over into the holding provider’s drawdown (or annuity or other solution) the market still won’t be working properly. That’s why access to guidance and advice will play such an important role.
"We need to think of new ways to engage and encourage people to use the guidance service, and go on to seek professional financial advice, offering help at various points on the retirement journey, while minimising costs. Or despite the greater flexibility and choice being introduced many customers may end up with poor outcomes."
Michelle Cracknell, Chief Executive, The Pensions Advisory Service said:
"This research is a good reminder that we will have to work very hard to demonstrate to people the benefits of taking guidance. Guidance services already exist but not enough people know about them or use them. We see the Budget promise of guidance as an opportunity to encourage more people to take up the opportunity but we will need to lead the horse to water and show them that the water is clear (impartial) and it is good to drink."
