DWP stronger nudge claims labelled 'pure spin' as MPs call for greater guidance support

MPs have criticised the Department for Work and Pensions' (DWP) statement of policy intent on impartial guidance, labelling its claims that the stronger nudge could significantly increase take-up of Pension Wise guidance as “pure spin”.

The government's statement previously said that “successful trials” had demonstrated a “significant increase” in the number of savers accessing Pension Wise appointments after pension providers explained the nature and purpose of the guidance, and supported them in booking the appointment.

In particular, the trials found that around 14 per cent of pension holders, who did not report having had guidance before, agreed to book an appointment, with around 11 per cent of pension holders attending a Pension Wise appointment.

However, during the recent Pension Scheme Bill hearing, Scottish National Party MP, Neil Gray, argued that the stronger nudge will not be enough to encourage greater take-up.

He stated: “The DWP claimed that it significantly increased the take-up of Pension Wise guidance. But, again, this is pure spin.

“The outcome of the stronger nudge trials was to get people to Pension Wise appointments in less than one in 10 cases. It moved them from 3 per cent to 11 per cent.

“A stronger nudge is just not going to be enough, not by a long chalk."

Work and Pensions Committee chair, Stephen Timms, also highlighted the trial findings as a “very limited increase”, stating that current policy “lacks determination”.

Timms also recently tabled an amendment to the Pension Schemes Bill which would require the secretary of state to write to members or survivors of pension schemes five years before becoming eligible to access their benefits with a scheduled date and time for a pension guidance appointment, as well as the option to reschedule or defer.

Indeed, speaking at the hearing, Timms emphasised that this amendment is "necessary" and that aspiring to an 11 per cent take-up is "simply not enough".

He stated: "Pension Wise is the realisation of the pension freedoms policy—the promise that was made at the time of free, impartial, high-quality guidance for those who do not use a regulated financial adviser for pensions decisions.

"It is the main consumer protection in the pension freedom policy—it was not an optional extra—but hardly anyone is using it.

"Pension Wise can be the difference between well-informed decisions leading to financial security in retirement and bad decisions, with pensions scams a real possibility.

"We need determination to fix that, and the current policy lacks determination."

Timms concluded: "We cannot sit back while Pension Wise continues to be an excellent service taken up by hardly anybody.

"The government and regulators must end their indifference on this. Aspiring to an 11 per cent take-up simply is not enough.

"We need auto-enrolment into a service that enables better outcomes from pension savings."

However, Pensions Minister, Guy Opperman, addressed the points raised by both Timms and Gray during the hearing, emphasising that despite claims to the contrary, there is previous engagement with members via a "multitude of interventions".

He also noted that as individuals get closer to accessing their pension savings and enter the drawdown phase, proposals in the Financial Conduct Authority (FCA) policy statement, expected to come into force in 2021, will "definitely make a difference".

Opperman stated: "Although I fully accept that I should be pressed on DWP guidance, the FCA policy statement will come into force in 2021, and, between now and report, detailed explanation of what that statement entails should be provided to the right hon. Member for East Ham [Timms].

"If it has not been provided to the select committee as part of its inquiries on scams, that is a lacunae that needs to be addressed, because it seeks to ensure that all arms of government are working together.

"Briefly, on the stronger nudge towards guidance, which arose from the Financial Guidance and Claims Act 2018, it is fair to say that where there is transfer from one scheme to another to continue to accumulate and no risk is identified, the transfer can be acted on in accordance with the current requirements.

"Where a risk is identified, the member must be notified that they will be required to prove that they have taken information or guidance before the transfer can proceed.

"That is the appropriate effect of what we are legislating for in clause 125 and in the bill."

He added: "I will not go into detail about whether the stronger nudge is a good behavioural insight trial.

"I support what has been done, but that is a matter of ongoing regulation as well. The appropriate approach would be that we work with the select committee on making that as effective as possible on an ongoing basis.

"I invite the right hon. gentleman to withdraw his amendment."

Opperman's full comments in response to the comments raised throughout the hearing can be found here.

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