FCA 'stronger nudge' pensions guidance rules come into force

Pension providers must offer savers over 50 a free Pension Wise appointment when they decide to access savings held in a UK-based workplace or private pension, under "stronger nudge" rules brought in on 1 June by the Financial Conduct Authority (FCA)¹.

The rules require providers to refer savers to Pension Wise guidance, explain its nature and purpose, and either offer to book an appointment or give information on how to book one¹. They apply to defined contribution pensions, both personal and workplace, and to providers of personal and stakeholder pension schemes, including operators of self-invested personal pensions (SIPPs)¹. The service is not available to those accessing or transferring out of a defined benefit pension, which is typically based on final salary and years of service rather than the saver's own contributions¹.

The changes followed a government consultation and trials which found take-up of Pension Wise appointments increased significantly when people were nudged¹. At present, just 14% of defined contribution pension pots are accessed after the use of Pension Wise¹. Pensions minister Guy Opperman said this would help people make informed decisions about accessing their savings, and help protect consumers by encouraging the use of free, impartial guidance¹.

Pension Wise is part of the Money Helper service and offers guidance on defined contribution pension options¹. It was introduced in 2015 after the government introduced greater choice in how savers can access their pension savings¹. An appointment typically lasts around 45 to 60 minutes and covers pension and payment options, how each option is taxed, next steps and what to check before making decisions, and how to look out for pension scams¹. Pension Wise will not recommend any companies, or tell savers how to use their pension pot or invest their money¹.

Savers can opt out by telling their pension provider they do not want a guidance session, and those who book their own session should also tell their provider¹. Appointments can be booked by phone or online, face to face or over the phone, and a further free appointment is available if circumstances have changed since the last one¹. The booking line is 0800 138 3944¹.

"Waiting until a point where someone may already have decided how they want to take their retirement income was never going to be as successful as contacting someone who is still exploring their options."

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, quoted by Which?¹

Hargreaves Lansdown said that when it took part in trials with the Money and Pension Service, it found the earlier the nudge came in the process, the more likely the person was to take up the Pension Wise appointment¹.

Why it matters for households

Anyone over 50 with a UK-based defined contribution pension who wants to access their savings now has to be offered a Pension Wise appointment first, and providers must explain what the service is and how to book it¹. The requirement applies from 1 June 2022¹. It does not cover people accessing or transferring out of a defined benefit pension¹. Savers who have already taken regulated financial advice on their options can decline the session by telling their provider¹. The appointment itself is free and does not recommend products or providers¹.