The take up of Pension Wise appointments remains stubbornly low and the FCA’s recent paper “The stronger nudge to pensions guidance” is the latest in a line of initiatives designed to increase take-up.
But when does a nudge become a shove? And isn’t timing critical in how receptive pension members will be to any such well-intended intervention?
Currently providers must signpost Pension Wise whenever a member enquires about taking benefits and although debated in Parliament there are no plans to make guidance mandatory.
Nor is the plan for members to be offered a pre-booked appointment 5 years prior to becoming eligible to access their pension savings.
What is proposed here will be perceived by many to be another hurdle to accessing benefits, at what instinctively feels like the wrong point in the process.
When the member contacts their provider indicating they want to take benefits the provider will have to explain what pension guidance is and offer to make an appointment with Pension Wise.
This is too late in the day. If the member has already made their decision they are far less likely to be open to an appointment, or even if they do go along with it, be open-minded within that appointment, than if the guidance was at a time they first started considering the options on how to access their pension.
The draft regulations may also mean that some clients who are receiving wider advice will have to be given the guidance nudge and offer of an appointment – and firms may fall foul of Principle 6 if they indicate in any way that receiving guidance is unnecessary or not beneficial.
To proceed with taking benefits members will need to confirm they have attended a Pension Wise appointment, taken regulated advice, or that they have opted out. Also up for consultation is whether there should be a waiting period for those opting out – to avoid this becoming the quick way to access the pension. Whichever camp you fall into delays lie ahead.
The elbow prod to guidance doesn’t just apply on members accessing benefits (which itself could be many times if partial drawdown or UFPLS is taken). The shove will also occur on any transfer where the member is over 50 – with the onus being on whichever scheme the member contacted to initiate the transfer.
The rules apply to “survivors” too. So, as the rules are drafted, providers would have to offer to make an appointment with Pension Wise for a beneficiary who wanted to take drawdown who could be in the twenties (or even a child!) – despite the fact it’s only available to over 50s.
Truly a case of wrong time, wrong place.
Lisa Webster is senior technical consultant at AJ Bell. She is an economics graduate with over 15 years’ experience in financial services. Prior to joining AJ Bell in May 2014 she spent nine years working in senior technical and consultancy roles at a major SIPP and SSAS provider. She is part of the AJ Bell Technical Team, responsible for providing regulatory and technical analysis to the business and outside world. Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Twitter: @lisasippster