Workplace pension schemes will be required to ‘nudge’ members towards getting advice when they seek to access their funds under new proposals set out by the Department for Work and Pensions.
By steering savers towards obtaining guidance from the government’s Pension Wise service, the DWP hopes people will be able to make “appropriate and informed choices” about accessing their pension pots.
“I want taking guidance to become a natural part of the journey savers embark on when making decisions about their pension pots,” said minister for pensions and financial inclusion Guy Opperman. “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.”
It plans to amend the Financial Guidance and Claims Act 2018 to place a duty on trustees and managers of occupational pension schemes to refer savers to pensions guidance when they make an application to transfer pension rights or start receiving flexible benefits. They would also be required to ensure members have received guidance or opted out of receiving it before proceeding with an application to withdraw funds.
A Stronger Nudge trial between October 2019 and February 2020 saw a significant increase in the number of savers making an appointment with Pension Wise, which provides free impartial advice to over 50s seeking to access their pension pots and is part of the Money and Pensions Service, after they received an explanation of the nature and purpose of the guidance.
The pension provider either offered to book a Pension Wise appointment for the customer, or transferred the customer to the Money and Pensions Service who booked a Pension Wise appointment.
The trial involved three pension providers – Aviva, Legal and General and Hargreaves Lansdown.
In 2019/20, the Money and Pensions Service delivered over 200,000 Pension Wise interactions with savers – more than triple the number delivered in the service’s first year.
The DWP said it would be consulting on draft regulations and would produce an impact assessment lookingat how much the changes would cost industry.