Will a ‘stronger nudge’ boost Pension Wise take-up?
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The government is introducing the ‘stronger nudge’ to Pension Wise from 1 June this year to boost the low take-up rates of the guidance service. Will the nudge get more people to stop and think about their pension decision?
The stronger nudge means schemes will have to offer to book an appointment for people looking to access their pension unless they opt out in a separate communication. Their application will not proceed unless they have either booked an appointment or opted out, although attendance at the appointment is not mandatory. The regulations by the Department for Work and Pensions are intended to mirror rules made by the Financial Conduct Authority last month.
Tweaks were made to the final DWP regulations so that over-50s who simply transfer their money into a different scheme do not have to communicate their opt-out separately.
Trustees told to get ready for stronger nudge
The regulations were consulted on last summer, and the DWP said the majority of responses strongly supported its intention to increase the take-up of Pension Wise guidance. The net annualised impact on business was calculated as less than £5m.
Pensions minister Guy Opperman said the stronger nudge provisions are designed to help people make informed decisions about accessing their pension savings.
“These measures will help protect consumers and encourage use of the free, impartial guidance that is available to help them make informed decisions about the options available to them,” he said.
David Fairs, executive director for regulatory policy, analysis and advice at the Pensions Regulator welcomed the new regulations for trustees to encourage members to take Pension Wise guidance as a normal part of the process of accessing a pension and reminded trustees and administrators to be ready for them.
“I believe helping savers make decisions on when and how to access their DC pots is central to good outcomes,” he said, adding: “These new duties may require changes in scheme processes, which is why trustees and their administrators should be preparing now ahead of the regulations coming into force later this year.”
The start date for the regulations was originally in April this year but has been pushed back until June.
PLSA: Small pots should have been made exempt
The Pensions and Lifetime Savings Association, which represents occupational schemes, welcomed the extra time, but said the changes made to the final regulations do not go far enough.
“The PLSA is a big believer in more people accessing Pension Wise guidance but is not fully convinced that the stronger nudge proposals will deliver this,” said deputy director of policy Joe Dabrowski. The government’s trials had shown that although the stronger nudge increases take-up of Pension Wise guidance, it remains at a low level.
Dabrowski also criticised the fact that small pots are not exempt under final rules: “Unfortunately, savers with small pots of £1,000 or less are not exempted from the process, which will see them delayed or suffer increased costs when they try to access their pension. The result of this could be that they will be nudged to hear more about options that aren’t even available to them which, in turn, may well jeopardise other automatic small pots solutions that the industry is working on to help the saver out.”
