FCA requires providers to book Pension Wise appointments in guidance push

Jenna Brown reports

Pension providers will be required to book Pension Wise appointments for customers under new plans published by the regulator as it attempts to increase retirement guidance take-up.

Providers currently have a duty to signpost clients to Pension Wise for guidance on their retirement plans but will now be required to book the appointment for customers under a “stronger nudge” policy outlined in a consultation paper on Tuesday (4 May).

They will also be required to flag that consumers can take regulated financial advice at their own cost.

Under the new requirements, providers will also have to confirm if people opted out of the process or attended the appointment and whether they accepted the guidance on offer. If they choose to go down the advice route providers will have to record where they sought that advice.

The stronger nudge policy will kick in when a consumer decides, in principle, how to access their pension savings, or transfer for the purpose of accessing their pension savings, the regulator’s consultation paper said.

Pension Wise was set up by the government following the introduction of pensions freedom and choice in 2015. The service, now under the umbrella of the Money and Pensions Service, gives free impartial guidance to over 55s on retirement matters.

The FCA said so far, only a small proportion of defined contribution (DC) pension pots accessed for the first time have used the service despite several initiatives being put in place to increase take-up. These included provisions set out in the Financial Guidance and Claims Act 2018. The FCA has now moved to force the issue further. 

FCA retirement income data suggest that more than a third (36%) of pots accessed for the first time in 2019/20 used regulated financial advice.

FCA executive director, consumers and competition Sheldon Mills said: “Pension Wise is a great service, which helps people to understand their options when accessing their pension savings. We know that when people use Pension Wise they are happy with the service and find it helpful. However, few people are choosing to attend a guidance appointment.

“Our proposals will help to ensure that consumers get more information about the service, are further encouraged to use it and can have an appointment booked for them there and then.”

Making Pension Wise appointments mandatory was debated before the 2018 Act became law but was not included in the final legislation as it was seen as a “tick box” exercise or a barrier to accessing pension savings. It is hoped “strong nudges” will increase the use of Pension Wise and regulated advice. 

The FCA also pointed out that more recently, MPs voted against an amendment to the Pension Schemes Bill, now the Pension Schemes Act 2021, which would have required pension scheme members to be offered a pre-booked Pension Wise appointment five years before they are eligible to access their pension savings.

Aegon pensions director Steven Cameron said: “The pension freedoms have given people huge choice around when and how to take retirement income. Ideally, individuals would seek professional financial advice on such an important decision that could impact their financial position throughout retirement.

“For those who are unwilling to do so, or feel the costs are prohibitive, guidance is a very valuable fall back and Pension Wise is free to those approaching retirement, as it’s funded by the industry.”

He added: “We support measures to strengthen the encouragement or ‘nudges’ to make a Pension Wise appointment so as many as possible use their valuable service, which can also help protect them against falling foul of pension scams.

“But this needs to remain voluntary as going further and making an appointment compulsory would effectively bar individuals from accessing their own pension funds. Alongside Pension Wise, it’s important that pension providers can also offer individuals a range of guidance services personalised to their needs throughout their pension journey.”   

‘Plan set up to fail’

Just Group group communications director Stephen Lowe said the consultation outlined a “plan set up to fail”.

“With the three-year anniversary of the Financial Guidance and Claims Act less than a week away, the FCA has been compelled to take some action to implement its responsibilities although it knows the evidence shows the ‘stronger nudge’ will only deliver a marginal change in Pension Wise use.

“This is a plan set up to fail, which is acknowledged by the fact this consultation is appealing for more ideas to increase guidance usage, particularly earlier in the retirement journey when people are still making up their minds.”

He added: “The government has set an ambitious objective for the regulator but has also effectively tied its hands by refusing to let it consider genuinely transformational measures such as automatic enrolment into pension guidance sessions from age 50. Our own research found that fewer than 4% – one in 25 people – aged 45-54 with defined contribution pensions would opt out of a guidance session that has been booked for them.”

Personal Finance Society chief executive Keith Richards said: “Pension freedoms has increased choice and helped to raise awareness of retirement planning more widely but it has equally introduced greater complexity and the potential unintended consequences of making poor or irreversible life-changing decisions.

“The Personal Finance Society fully supports greater nudging of pension savers towards guidance to better inform, empower and sign-post people to professional advice where appropriate and look forward to working with MaPS and FCA to continue to improve greater consumer awareness and access to both guidance and regulated advice.”