The amendment, which was announced on 25 January, has been welcomed by Tom Selby, senior analyst at AJ Bell, who said it had the potential to be infuriating to customers if brought into law.
Selby said: “The original ‘auto guidance’ amendment was a bit of a dog’s breakfast.
“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,” he said.
The amendment has been replaced by a provision that requires providers to ask customers looking to access pension freedoms if they have “received pensions guidance or appropriate independent financial advice”.
When the person indicates they have not received guidance or advice, the provider will have to:
- Recommend they seek guidance or advice, and;
- Ask the member whether they wish to wait until after receiving guidance or advice before accessing or transferring their pot, or if they which to proceed without it.
Selby said the amendment is a “vast improvement” and should help increase awareness of the importance 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,” he said.
The latest HM Revenue and Customs statistics on flexible payments from pensions shows the average withdrawal per person in 4Q17 was £7,596 ($10,618, €8,655). This is almost £2,000 lower than the 4Q16 average of £9,630.