Following successful trials, the DWP has announced proposals to introduce a new ‘stronger nudge’ regime, aimed at helping savers to choose to obtain free pensions guidance so that they can make better-informed decisions when accessing their pension savings and be protected from scams.
Since Pension Freedoms were introduced in 2015, people can access their pension benefits from the age of 55 and have a greater range of options for doing so.
The Pension Wise advisory service was launched as part of these changes to provide free, impartial guidance to help individuals aged 50 and over to understand the options available to them. It transferred to MaPS at the beginning of 2019.
Demand for the Pension Wise service has grown year on year since it launched and there has been debate about how to promote the take-up of guidance in the most effective way.
The stronger nudge regime
The DWP published a statement of policy intent that laid out plans for occupational pension schemes to be required to nudge members towards taking guidance from Pension Wise (if they haven’t already done so) when they seek access to their pension.
This follows trials, led by MaPS, which showed that more savers set up an appointment with Pension Wise when providers explained the nature and purpose of the guidance and either offered to book a guidance appointment for them or transferred them to Pension Wise to book the appointment themselves. The trial found little difference between the two and, for both, 14% of savers who didn’t report having had guidance before agreed to make an appointment, which is 11% more than the control group.
The Government will consult on draft regulations that would require pension trustees to present taking guidance as part of the retirement process. The FCA will introduce rules to implement the regime for personal pension and stakeholder schemes.
The new stronger nudge duties are intended to apply to trustees of occupational pension schemes whose members make applications to start receiving flexible benefits or to transfer pension rights. This means that trustees of DB and DC schemes will have to make changes.
The Government wants to allow trustees and managers the flexibility to choose a process that works best for them, but stipulates that they must take proactive steps to facilitate appointments for their members. The Regulator is expected to introduce guidance for trustees to help to implement the measures.
The intended regulations will specify that a member stating that they have received guidance is sufficient for the transaction to continue without the nudge. A new duty to record any opt-outs from guidance will sit with the scheme trustees and managers.
Capita comment
Although the numbers accessing Pension Wise guidance appear to be on the rise, they’re still not great and so measures that try to increase take-up are welcome. There still remains the question of whether the nudge towards guidance should be given earlier in the retirement journey, as many people will have already decided what action they want to take when they come to access their benefits.