Pension providers to refer customers to pension guidancewritten by Bella Palmer
The rules apply to providers of personal and stakeholder pension schemes, including operators of self-invested personal pensions
Pension providers will be required to refer customers to Pension Wise guidance, explain the nature and purpose of the guidance and offer to book a Pension Wise guidance appointment in most cases.
The changes, first announced in December 2021, implement a requirement set by Parliament and are designed to increase take-up of the Pension Wise service.
The rules apply to providers of personal and stakeholder pension schemes, including operators of self-invested personal pensions. The FCA has worked with the Department for Work and Pensions on these rules, as they are working on corresponding regulations for occupational pension schemes.
Emma Byron, managing director of Legal & General Retirement Solutions, commented: We fully support the stronger nudge guidance. Having participated in the behavioural trials to explore the best way to persuade people to take guidance from Pension Wise, we found that stronger nudges led to a greater take up of appointments. We also saw that where people took no formal advice or guidance, they were almost three times as likely to make a cash withdrawal than put their money in an annuity or drawdown product that could benefit their finances longer term.
Taking cash isn’t always the wrong decision, especially for people with smaller pension pots, but what we did see was a stark difference in the actions of people that took advice or guidance and those that didn’t. Taking financial action without giving it proper thought can have a real impact on your lifestyle long-term and as we’ve seen from recent cost of living pressures, having an adequate safety net is essential, she said.
James Jones-Tinsley, technical specialist at Barnett Waddingham, added: At face value, any move to increase people’s engagement with their pension and take advice on their next steps is a positive thing. The Government’s move to push people aged 55 and over to take a Pension Wise appointment before drawing down their pension was a sensible first step; however, it is poorly timed and mismanaged.
He said: To date, only 1 in 33 of those eligible have taken the appointment. If the timing of the nudge was moved earlier, before people have already made a decision and need their money to be readily available, the value of the appointment would increase exponentially. What’s more, we could learn our lesson from the success of the Covid vaccine booking system and replicate it for those in their 50s to create a smooth, streamlined appointment process.
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