Some DB schemes subject to ‘stronger nudge’ requirements

The stronger nudge, due to come into force on June 1, is designed to increase uptake of Pension Wise guidance by ensuring that scheme members must either receive or opt out of guidance before accessing or transferring their pension.

The government has repeatedly said it is keen to increase guidance uptake in this way, but has several times refused to set out specific targets.

Though the goal of the stronger nudge has always received industry support, the means of achieving it were criticised when put to consultation in July last year, not least for the cost and burden imposed upon scheme administrators.

The government responded by easing some of the regulations, though this was not sufficient to dispel all concerns about the administrative workload entailed by the stronger nudge.

The stronger nudge was targeted primarily at DC schemes, but an LCP pensions bulletin on April 28 confirmed that, because the new rules apply at a benefit level rather than a scheme level, certain DB schemes will also have to comply with the new measures.

These are schemes that, though mainly DB in nature, have DC elements — particularly an additional voluntary contributions mechanism — built in.

As with DC schemes, DB schemes with a DC AVC facility will have to ensure that they refer members looking to access or transfer their pension to Pension Wise guidance, and establish that the member has either received or opted out of this guidance before allowing the member to proceed.

LCP said: “Any scheme that provides DC benefits, whether occupational or contract-based, whether mainly DB or mainly DC, should be finalising the necessary adjustments to its administration processes in order that the stronger nudge can operate for requests received from June 1 2022.”

Benjamin Mercer is a senior reporter at FTAdviser's sister publication Pensions Expert