Trust-based workplace pension schemes in the UK will be required to offer to book an appointment with impartial guidance service Pension Wise for those looking to access their defined contribution (DC) pension, the government confirmed today.
The “Stronger Nudge to pension guidance” measures will come into force on 1 June 2022. Members will be able to opt out of receiving guidance, but this must be an active choice.
“We want guidance to be available to savers when making decisions about accessing their pension pots,” said Guy Opperman, minister for pensions and financial inclusion.
“These new measures support savers and further this government’s commitment to ensuring people across the country have the necessary support and information they need to make informed choices about their financial futures.”
The Department for Work and Pensions (DWP) first set out its “stronger nudge” proposals in 2020, based on trials led by the Money and Pensions Service (MAPS). In July last year the DWP consulted on draft regulations.
Changes made in response to consultation feedback include allowing trustees and managers to point members towards guidance on receipt of an application form or a communication in relation to an application, and ensuring trustees and managers will not be required to organise the booking of an appointment for a beneficiary and coordinate diaries via a purely postal or online route.
In its consultation response, the DWP also challenged criticism about there being differences between its regulations and corresponding rules from the Financial Conduct Authority for contract-based schemes.
“Many of the alleged differences between the FCA’s rules and our regulations we do not consider to be genuine points of difference,” it said. Some differences were simply a matter of “the different legislative context in which the respective organisations operate”, it said.
At the same time, the DWP also noted that it had made changes that brought its regulations and the FCA’s rules into closer alignment, such as dropping the proposed requirement to opt out in a separate interaction on transfer requests.
Renny Biggins, head of retirement at The Investment and Savings Alliance (TISA), said the closer alignment with the FCA regulations was positive.
“It is essential to industry and consumers that there is consistency in the requirements, as this will remove complexities where transfers span across both regulatory regimes and ensure the nudge to pensions guidance achieves its objectives.”
Emma Byron, managing director, Legal & General Retirement Solutions, said the provider was calling for personalised guidance to help fill the gap between advice and information.
“Pension Wise has a crucial role to play in this, so the stronger nudge is a step in the right direction, but it’s important that it is used effectively,” she said. “It remains to be seen whether requiring members to opt out of guidance in a separate interaction will be effective or a barrier.”
At Hymans Robertson, partner Michael Ambery said the consultancy was pleased to see the consultation announcement but hoped that once implemented, “it doesn’t become a tick box exercise in which consumers simply opt out of receiving guidance”.
“It will be vital that employers, trustees and the industry look at the guidance that is available and work together to increase both engagement and awareness,” he said. “They must take responsibility for highlighting the importance of life-changing financial decisions at all stages of the pension and savings journey.”