Are defined contribution members falling between the gaps as the Department for Work and Pensions and the Financial Conduct Authority propose different things for the stronger nudge to Pension Wise? One provider suggests so. 

 

The existence of two regimes for trust and contract-based money purchase schemes is once more causing issues for the industry and potentially pension scheme members as well, as proposals for a stronger nudge to guidance differ in several points between the two. 

 

The stronger nudge to guidance is the government’s attempt to reduce the number of people who access their pension unadvised by giving a strong prompt to take up a free Pension Wise session. But provider Aegon has criticised the lack of alignment between the two consultation proposals for trust and contract-based schemse, saying that despite this being “an ideal topic for join-up", the two proposals “differ in many regards, with the potential for customer confusion and additional costs for providers”. The DWP’s consultation runs until 3 September, while the FCA’s closed in late June. 

 

 

A stronger nudge towards Pension Wise can be very helpful for both trust and contract-based pension scheme members, said Steven Cameron, pensions director at Aegon, but he believes that differences in the proposals could cause confusion for people who have both forms of pension - as well as creating additional costs for providers offering both types of schemes.  

 

“In other areas of pensions, there are encouraging signs that the DWP, the Pensions Regulator and the FCA are working together on the pensions consumer journey,” said Cameron. “We’re urging all parties to do likewise on stronger pension nudges.” 

 

Some of the differences appear arbitrary. While the FCA is proposing that providers must nudge all those over 50 who are transferring, for example, the DWP excludes the need to nudge for those doing so for the sole purpose of consolidating their pensions.  

 

“This exemption will remove the inevitable time delays from nudging towards unnecessary Pension Wise guidance ahead of consolidation, which will often be several years ahead of any decision to access benefits,” said Cameron. 

 

One of the key differences in the proposals is that the FCA wants to require providers to offer to make the appointment for the consumer, while the DWP limits this to phone contacs. A less onerous approach is suggested for digital contact, saying that trustees and administrators could, for online journeys, simply provide a link to the Pension Wise online booking service. 

 

The FCA is also going further by linking the obligation to nudge on whichever of the ceding or receiving scheme is approached by the person regarding transferring, while the DWP limits this to the member’s current scheme. Cameron said this was preferable because “it avoids the need to introduce two separate nudge processes for transfers out and in”. 

 

Similarly, there appears to be a lack of alignment on whether the new requirements should apply from a minimum pot size only – something the DWP is asking the industry about while the FCA did not – and a mandatory ‘break’ of interaction before a member can opt out, with the DWP proposing that members should not be able to opt out at the initial interaction while the FCA is somewhat ambivalent on this point. 

 

A DWP spokesperson said: “This Government is committed to ensuring that people have the support and information they need to make informed choices about their financial futures.” 

 

The spokesperson added: “The Stronger Nudge will ensure providers present guidance as a normal part of accessing pension savings, and they will offer to book a Pension Wise appointment for the individual unless they wish to opt out of receiving guidance.” 

 

The FCA did not respond to a request for comment.