The Pensions Regulator will introduce guidance for trustees on new government ‘nudge’ tactics, designed to encourage DC savers to contact Pension Wise prior to retirement.
The Department of Work and Pension say it want to introduce ‘stronger nudge’ measures to ensure those in DC schemes to get guidance from Pension Wise, the government consumer help service.
This follows a DWP trial which demonstrated a “significant increase” in the number of savers accessing a Pension Wise appointment when providers explained the nature and purpose of the guidance, and then either offered to book a Pension Wise appointment, or transferred them to the Money and Pensions Service who booked the appointment.
Pensions Minister Guy Opperman says: “I want taking guidance to become a natural part of the journey savers embark on when making decisions about their pension pots. These measures will advance the Government’s goal of ensuring that people have the necessary support and information to make informed choices about their financial futures.
“As well as encouraging people to use the service, the proposals will help protect consumers from scams.”
The DWP says the “stronger nudge” measures are part of a package to help people make “informed decisions” about accessing their pension savings.
However the DWP has stepped back from effectively opting people in to guidance. So these ‘nudges’ won’t be as strong as those that were initially used to set up the AE system.
The industry remains divided as to how effective these behavioural reforms will be.
The People’s Pension director of policy Phil Brown says: “Anything that can be done to ensure that savers are making better informed decisions about what to do with their hard earned pension funds is to be welcomed. Our recent work around pensions fraud highlights the very real dangers faced by people who are deciding what to do with their retirement pots.”
AJ Bell senior analyst Tom Selby adds: “Low take-up of official pensions guidance has presented a significant challenge to policymakers in the wake of the 2015 pension freedoms reforms.
“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.”
However Just Group described this move as a “fudge” rather than “nudge”.
Just Group director Stephen Lowe described the policy as “lacking ambition” and he says it will result in a significant minority receiving guidance, rather than the majority.