• Occupational pension schemes will be required to present a pension guidance appointment as part of the normal process when people want to transfer their pension or access it flexibly under proposals outlined by pensions minister Guy Opperman today (https://www.gov.uk/government/publications/stronger-nudge-to-pensions-guidance-statement-of-policy-intent/stronger-nudge-to-pensions-guidance-statement-of-policy-intent)
• ‘Stronger nudge’ intervention intends to increase the take up of guidance appointments as part of the retirement savings journey
• FCA and DWP need to work together to ensure consistency across different types of pension scheme
• Policymakers should consider broader nudges across the retirement savings journey, rather than simply focusing on transfers and the point people access their pension
Tom Selby, senior analyst at AJ Bell, comments:
“Low take-up of official pensions guidance has presented a significant challenge to policymakers in the wake of the 2015 pension freedoms reforms. These reforms have been welcomed by savers but also present a new set of challenges, from understanding the tax framework to managing withdrawals in a sustainable manner.
“With many people either unable or unwilling to pay for regulated financial advice, boosting retirement engagement and understanding by increasing use of Pension Wise’s independent services is clearly a laudable policy goal.
“The Government’s approach of presenting this nudge as a choice, rather than compelling people to take guidance before they can access their retirement pot, is the right one and should avoid an unwelcome scenario of savers facing what they perceive as new barriers to accessing their own money.
“As these proposals are taken forward it will be crucially important that the Government and the FCA work together to ensure consistency across different types of pensions.”
FCA and DWP alignment
“It would clearly be a bad outcome if the process governing occupational schemes regulated by the Pensions Regulator was somehow different to the process facing FCA-governed schemes, when from the perspective of members holding both types of pension they are broadly the same.
“Policymakers should also consider whether focusing this nudge when people want to access their benefits is the most effective point of delivery, given that many people will have already made a decision and primarily be focused on accessing their tax-free cash.
“If the object of the exercise is to boost retirement engagement, there is a strong argument for looking at nudges earlier in the retirement savings journey.”
