The FCA rules on stronger nudge to guidance also apply to beneficiaries, where a member dies. If the beneficiary is a dependant or was nominated by the member then they will have to decide how to take their benefits, and pensions guidance could be very useful in this scenario.
Do these rules also apply to transfers?
Where the member is transferring to a new pension scheme because they want to access their pension savings, the provider they contact has to nudge them to take pension guidance.
To make it simpler for providers, the FCA has said the nudge need not be given if the person transferring is younger than 50 years old, as the provider can assume they are not transferring to access benefits. But some pension providers may choose to ask the member their intention on transferring and only nudge those who are doing it for reasons of accessing benefits.
If the customer directly contacts the provider, then the provider has to deliver a stronger nudge to guidance. In most cases, the customer will only contact the receiving provider, who will be the one to give the nudge. But if they also contact the ceding provider then the customer may receive two nudges.
What about occupational schemes?
The DWP has also issued a set of rules for occupational pension scheme administrators and trustees giving nudges to members when they request to access benefits or transfer. These rules do not apply to small self-administered schemes where all the members are trustees.
The rules are very similar to the FCA’s, but not exactly the same. One key difference is that the member’s opt out has to be given in a standalone communication when the member requests to access benefits (but not when they request a transfer). These rules come into effect on the same date as the FCA’s – June 1 2022.
What do we expect to happen?
There is no doubt more people will attend Pension Wise appointments because of these new rules. However, the number of appointments is currently at a low level, and the work and pensions committee said in its recent report on accessing benefits that the stronger nudges will not be enough to make receiving pension guidance the norm.
Maps conducted research 18 months ago that showed that only 13.5 per cent of customers took providers up on the offer to book Pension Wise appointments. Out of those, 80 per cent kept their appointment.
The stronger nudge is delivered at the point the customer has already decided what to do with their benefits. If it was delivered at an earlier stage – maybe at age 50 – it may be more effective. But under the current rules, at the time the nudge is given many customers will have already made up their minds what they want to do and may only want the payment of funds to be completed promptly. They will probably not be interested in halting the process to take guidance.