Providers to book pension guidance sessions from June

According to rules published by the regulator this morning (December 1), providers will need to put in place stronger nudges towards guidance in as little as six months' time.

Currently, providers are required to signpost consumers to Pension Wise and encourage them to seek appropriate pension guidance or advice to help them understand their options. However, take up of Pension Wise guidance remains low.

Under the new rules, when a consumer has decided how they wish to access their pension savings or transfer rights providers must first refer them to Pension Wise.

They must then go on to explain the nature and purpose of Pension Wise guidance and thirdly offer to book a Pension Wise appointment.

Should the consumer accept the offer, they must book the appointment or provide them with sufficient information to book their own appointment.

The Financial Conduct Authority also said providers must record whether the saver declined the offer to receive guidance, received guidance or went on to receive regulated advice.

While the nudge may come too late in the consumer pensions journey for some, the trigger is as early as we can make it while complying with the requirements of the Act.FCA

The rules apply to providers of pensions, including operators of self‑invested personal pensions (Sipps).

Too late

The FCA said while there was broad support for the proposals, around half of respondents thought the nudge to Pension Wise guidance came too late in the journey when savers would have already made up their mind about how they wish to access their pension savings. 

There were concerns savers could see the stronger nudge as a barrier to accessing their pensions and that this could lead to an increase in complaints.

However, the FCA said the Financial Guidance and Claims Act 2018 required the nudge to be delivered as part of and before proceeding with the application process.

The FCA stated: “The earliest and most consistent point in our rules when the application process is first triggered is when a consumer makes a decision in principle about how they wish to access their pension savings. 

“So, while the nudge may come too late in the consumer pensions journey for some, the trigger is as early as we can make it while complying with the requirements of the Act.”

Stephen Lowe, director at Just Group, said: "Calls for a small trial of a system that automatically books guidance sessions for key groups from age 50 have fallen on deaf ears despite it being the most credible idea to boost guidance use.

"Government needs to stop rationing the Pension Wise service and take the only big idea on the table and run a trial."

Providers will also be required to nudge savers to guidance at the point they transfer a pension with the aim of accessing their savings. The nudge can either be provided by the transferring or receiving scheme.

Jon Greer, head of retirement policy at Quilter, said: "The requirement to nudge to pension guidance for transfers is not a creation of the regulator; parliament passed the requirement in the Financial Guidance and Claims Act 2018 (FGCA18).

"Even with the guidance note accompanying today’s regulations it has the potential to capture a wide range of transfers."

No exemptions

Some respondents also suggested those who had received financial advice or Pension Wise guidance previously should be exempt from the nudge.

This is because it could lead to confusion or may be seen to doubt the validity of the guidance or advice they have previously received. 

A few also suggested those who are engaged in their pension decisions, including choosing their contribution levels and investments, should be exempt from the nudge.

But the FCA said the nudge should be delivered to all savers, regardless of whether they have received advice before.

The FCA's latest retirement income data showed that only 14 per cent of consumers accessing a DC pension pot for the first time used Pension Wise.

However, the number of Pension Wise appointments delivered has increased since the service launched in 2015, to just over 130,000 in 2019-20.

The City watchdog said it will start work in early 2022 to look at additional ways it can support consumers.

It stated: “This will consider the pensions guidance needs of consumers more holistically at different points in their pensions journey, including in the run‑up to accessing their pension savings.”

For example, it said MoneyHelper also offers other pensions guidance that may be more relevant than Pension Wise guidance at an earlier point in someone’s retirement journey. 

amy.austin@ft.com

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