• Pension providers will be required to offer to book retirement guidance appointments on behalf of savers under plans confirmed by the FCA today (The stronger nudge to pensions guidance: feedback on CP21/11 and final rules and guidance (fca.org.uk))
• New rules, which come into effect in June 2022, come in response to relatively low take-up of Pension Wise guidance sessions
• Around 1-in-7 (14%) savers who first access their defined contribution (DC) retirement pot take official guidance before doing so
• Pension firms will need to offer to book a Pension Wise appointment at the point a customer says they want to access their retirement pot
• FCA pours cold water on idea of automatic enrolment into Pension Wise appointments
Tom Selby, head of retirement policy at AJ Bell, comments:
“Making decisions about your retirement pot can be complicated and so it is crucial people seek guidance or regulated advice, to better understand their options.
“Take-up of guidance remains low, with just 1-in-7 people who first access their retirement pot taking official Pension Wise guidance before doing so.
“The aim of the ‘Stronger Nudge’ policy is to boost guidance take-up by requiring providers not only to make customers aware of Pension Wise when they first access their retirement pot, but to offer to book the appointment too.
“While this is likely to have some impact, this will almost certainly be dampened by the fact the nudge is delivered at the point someone first accesses their pension.
“In many cases this will be too late in the process, with the saver having already made a decision and likely to be focused on getting their tax-free cash.
“More testing needs to be done to consider when nudges to guidance work best, looking at the entire retirement savings journey.”
Regulator steers clear of guidance ‘auto-enrolment’
“The FCA has decided not to pursue either automatic enrolment into guidance sessions or the idea of a ‘cooling off’ period for those who opt-out of receiving guidance. On both counts we think the regulator has made the right call.
“Auto-enrolment into guidance would have risked being an administrative nightmare, with people inevitably failing to turn up for appointments and placing huge strain on Pension Wise.
“The very premise of auto-enrolment relies on inertia, while taking guidance by definition requires you to be engaged – for this reason alone the proposal falls down.
“A ‘cooling off’ period after opt-out, meanwhile, would have added unwelcome friction for people wanting to access their own money and would inevitably have resulted in a barrage of complaints.”
