Provider nudges increase guidance uptake

Provider nudges increase guidance uptake

A strong provider nudge drives three times more savers to seek pension guidance, trials arranged by the Money and Pensions Service (Maps) have found.

The trials, conducted by the Behavioural Insights Team on behalf of Maps between October 2019 and February 2020, tested two potential routes to guidance when savers looked to access their pension pots.

One was to get their provider to make a Pension Wise appointment for them, while the other was to transfer them to a member of the Pension Wise booking team who could explain the offer and make an appointment.

Maps found 11 per cent of savers attended an appointment within six weeks of receiving the provider nudge, compared with less than 3 per cent who went to Pension Wise directly.

Research conducted as part of the trial found people were most likely to decline a Pension Wise appointment if they felt they already had sufficient pension knowledge, while people were more likely to take up the guidance when they were still exploring their choices.

Overall, Maps found the trials to be successful at increasing the number of people taking guidance, saying it provided further evidence “of the significant impact nudges can have on behaviour”.

Maps had worked with providers Aviva, Hargreaves Lansdown and Legal & General Investment Management to understand how savers can be encouraged to seek guidance when they are thinking of accessing their pension pots.

The outcome of these trials will now form the basis for new guidance rules being developed by the Financial Conduct Authority (FCA) and department for Work and Pensions as part of the Financial Guidance and Claims Act 2018.

Minister for pensions and financial inclusion Guy Opperman said: “We are committed to ensuring that people preparing for retirement have access to the necessary support and information to make informed choices about their financial futures.

“The encouraging results from these trials will help inform our work to ensure savers are aware of the free, impartial pensions guidance available from the Money and Pensions Service."

Nathan Long, interim head of policy at Hargreaves Lansdown, welcomed the outcome of the trials, pointing out that “guidance could easily become the norm for soon-to-be retirees”.

Pantelis Solomon, head of financial behaviour at the Behavioural Insights Team, said he hoped more such interventions would be tested going forward to “increase the take-up of guidance even further and ensure that people are getting the help they need at retirement”.

But Stephen Lowe, group communications director at Just Group, said the trials failed to show the “transformational shift needed to dramatically increase take-up” of guidance and called on the FCA to be more ambitious when making the rules.

Mr Lowe said: “The FCA was handed the job of strengthening the guidance framework when legislation was passed in 2018. At the moment it is easier to opt out of guidance than to opt in. The new process should lead people towards guidance so those opting out must make an ‘active’ rather than a ‘passive’ decision.