DWP launches consultation on ‘stronger nudge’ to pensions guidance

The Department for Work and Pensions (DWP) has published a consultation seeking views on proposed regulations to give defined contribution pension savers a ‘stronger nudge’ to take appropriate pension guidance.

The consultation proposed regulations that would require the trustees and managers of schemes to ensure individuals seeking to access, or transfer for the purpose of accessing, their pension savings have either received or opted out of receiving guidance from Pension Wise.

It proposed that trustees and managers explain Pension Wise to the relevant members and facilitate the booking of an appointment as part of the application process, which the DWP hopes will remove the inertia of savers having to book their own appointments.

It also proposed introducing a separate opt out procedure to encourage savers to “seriously consider the value that guidance has” and ensure that, where savers decline guidance, this is an active choice on their part.

Trustees and managers will not be able to proceed with the application until members have opted out or received guidance.

The DWP wants to establish whether the regulations achieve their intended purpose, whether there could be any unintended consequences and, in particular, what effect this may have on the saver journey, how it would fit into existing provider communications and practices, and any impacts that may surround this.

A definition of an application to access or transfer pension savings was not included in the consultation, as the DWP wants to allow schemes to make decisions regarding when the process is triggered.

However, it noted that savers should be directed to Pension Wise guidance before they have made a final decision about accessing their savings.

The DWP also sought views on the additional costs that will be incurred for trustees and managers to abide by the new requirements, as well as the regulatory burden and costs to industry.

The consultation, which is open until 3 September 2021, relates to regulations under Section 19 of the Financial Guidance and Claims Act 2018, with the Financial Conduct Authority (FCA) responsible for consulting on the proposed rules to be made under Section 18 of the act.

The FCA launched a consultation earlier in the year on proposals that would require providers to nudge members towards receiving guidance from Pension Wise.

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