FCA and DWP encouraged to coordinate pension guidance approaches

The Financial Conduct Authority (FCA) and Department for Work and Pensions (DWP) must link up their approaches to improving member use of pensions guidance, according to Aegon.

While the FCA’s consultation on introducing a stronger nudge towards pensions guidance for members of contract-based schemes ended last month, the DWP is currently consulting on the use of similar methods for members of trust-based schemes.

Aegon pensions director, Steven Cameron, called on the two organisations to coordinate their approaches, pointing out that the differences could lead to “confusion for individuals who have both forms of pension and additional costs for providers offering both types of scheme”.

Giving examples in the current differences between the proposals, he pointed out that the FCA has proposed that providers “provide a stronger nudge to all those over 50 who are transferring”, while the DWP “excludes the need to nudge for those doing so for the sole purpose of consolidation”.

Furthermore, the FCA proposals call on providers to arrange Pension Wise bookings for savers who do not want to do it themselves, but the DWP proposals only require trustees and administrators to simply provide a link to the Pension Wise online booking service as part of a member’s online journey.

Cameron commented: “We’d like the FCA to adopt the DWP approach, which allows a streamlined digital approach without the backward step of needing human intervention in online journeys.”

Other differences included the DWP’s clearly stated obligation for members’ current scheme to nudge in the case of a transfer request, which Aegon described as “preferable” to FCA’s proposal for the ceding or receiving scheme to nudge the member based on which was approached first about transferring to access benefits.

Finally, the two organisations also differed on any potential opt-out process from Pension Wise appointments and on whether some pension pots might be so small that a nudge may not be required.

Cameron concluded: “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. We’re urging all parties to do likewise on stronger pension nudges.”

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