The Financial Conduct Authority (FCA) must fully consider whether its ‘stronger nudge’ legislation proposals are too skewed toward promoting Pension Wise over other forms of support, Aegon says.
The FCA’s proposals as outlined in a May consultation – based on a requirement in the Pension Schemes Act 2021 – aimed to make sure defined contribution savers have either received or opted out of receiving Pension Wise guidance when applying to access their pension savings.
Sections 18 and 19 of the Financial Guidance and Claims Act 2018 – referred to as the ‘stronger nudge’ legislation – saw a commitment to test a ‘nudge’ into pensions guidance outlined after industry debate around the low take-up of free guidance and how it should be promoted.
Aegon pensions director Steven Cameron said the regulator should instead consider its promotion of Pension Wise guidance “neutrally” in its discussions on the consultation findings with the Department for Work and Pensions (DWP), rather than placing “too much emphasis” on it.
“The benefits of seeking regulated financial advice should be given at least as much prominence,” he said as part of Aegon’s consultation response. “Any guidance services offered by providers should also signposted and this would allow consumers to make an informed choice based on their needs and the likely costs.”
Cameron added that financial advice “provides a much deeper support for a customer than Pension Wise guidance”, such as the inclusion of a personal recommendation.
“It’s particularly controversial for the FCA to be proposing even customers who have already taken financial advice on retirement options to still be nudged to Pension Wise,” he continued. “In many cases, the adviser may be supporting the customer in implementing their decision to access. While customers can opt out, requiring providers to nudge to Pension Wise in these situations could be seen by customers as the provider questioning the adviser’s recommendation.”
In a policy statement last October, the government reflected on a 19-week-long testing of scheme members’ take-up of free Pension Wise guidance. Pensions and financial inclusion minister Guy Opperman said the government hoped taking pensions guidance “becomes a natural part of the journey individuals embark on when making decisions about their pension savings.”
While ‘nudging’ savers into taking guidance from Pension Wise was outlined by the government as a start-point for boosting saver engagement, Cameron said it was in-house guidance from a savers’ pension provider, rather than Pension Wise guidance, which could help customers “make the most of product features”.
“[Aegon] envisage more personalised guidance support becoming increasingly expected of firms under the FCA’s new consumer duty proposals and again should be signposted alongside the other support options,” he said.
“The FCA will be discussing findings with the DWP as it in turn considers how to implement stronger nudges.”
Cameron continued: “With some individuals having both trust-based and contract-based pensions which they are accessing together, it would be particularly helpful if the requirements were fully consistent and implemented at a single point in time to ensure a joined-up customer experience.”
The FCA’s consultation closes on Tuesday (29 June).