Interactive Investor

‘Stronger nudge’ means more hand-holding towards pension guidance for those who need it

17th January 2022 10:05

Rebecca O'Connor from interactive investor

interactive investor comments on DWP response to consultation.

The government has published a response to its consultation on introducing a ‘stronger nudge’ towards pension guidance from Pension Wise.

In its response, the Department for Work and Pensions said:

  • Pension companies will not have to book an appointment with Pension Wise for someone but will be “required to facilitate the booking of a Pension Wise appointment as part of the application process”. This “may be satisfied by providing a phone number for beneficiaries to call if they wish the scheme to book an appointment on their behalf, alongside details on how the beneficiary may book an appointment themselves”.
  • It has “decided to exempt all requests to transfer flexible benefits from the requirement to opt out in a separate interaction. This means that transfers of flexible benefits by beneficiaries who have small pension pots, or wish to transfer to overseas schemes, will be exempt from the enhanced opt-out requirements.
  • It hasexpanded the scope of our exemption for transfers for the purpose of consolidation to include any transfer of flexible benefits where receiving flexible benefits is not one of the purposes. This means that where beneficiaries are consolidating or transferring without the intention of accessing flexible benefits, it will not be required for them to be referred to Pension Wise guidance or opt out of receiving Pension Wise guidance.

Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Pension Wise is a useful but under-used service. In a world where financial advice from an IFA is unaffordable for many people, it’s important that people who stand to benefit most from Pension Wise actually use it.

“As a result of this consultation, more people who need it will most likely choose to get some guidance over how to manage their retirement savings rather than none.

“The government’s response to the consultation is balanced. People who feel they don’t need a Pension Wise appointment do not have to have one, those who are transferring from one provider to another to consolidate don’t have to opt out and the ‘nudge’ will be delivered at the points the appointment with a Pension Wise adviser would be most useful. Importantly, the choice over whether to take action following the stronger nudge remains with the individual. Small pots are also included in the ‘nudge’.

“Some may still consider the approach ‘nanny state-ish’, but we know from the success of auto-enrolment that proactivity and pension planning do not always go together. Pensions is one part of our financial lives where a bit of handholding and ‘nudging’ can go a long way.”

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