AJ Bell discusses the FCA’s ‘stronger nudge’ legislation and warns that focusing the intervention at the point of access means it is unlikely to significantly boost guidance take-up.
Tom Selby (pictured), senior analyst at AJ Bell, comments:
Why the ‘point of access’ is the wrong time to nudge people to Pension Wise
“Boosting take-up of retirement guidance is the right policy aim but the current ‘stronger nudge’ approach risks being too narrow.
“We are concerned policymakers appear to be fixated on nudging people towards guidance at the point they access their retirement pot.
“This is precisely the wrong time to try to engage savers with guidance as the majority will have already made a decision and be focused on getting their money.
“In this context, a stronger nudge to Pension Wise risks being viewed as a barrier to accessing their pension and thus an appointment offer will, in most cases, be ignored or turned down.
“If a ‘cooling off’ period is introduced after someone has opted out of guidance this will further delay the process and providers will inevitably face a barrage of complaints from angry customers as a result.
“The stronger nudge would be much more effective if the link to accessing your pension is removed and the appointment booked on the person’s behalf earlier – for example, within two months of someone reaching their 50th birthday.
“But there needs to be a much broader review of the best points in time to nudge savers towards Pension Wise. In all likelihood people will be receptive to guidance nudges at different times in their lives – including before and after they have started taking a retirement income.”
Transfers ‘stronger nudge’ plans demand a rethink
“Bringing pension transfers into the scope of the stronger nudge would be misguided and risk creating a log-jam as a result of delays to people switching provider.
“Based on analysis of AJ Bell SIPP data over a 12-month period, if a blanket approach was taken then around half of all transfers would need to be offered a Pension Wise appointment booking.
“And if a cooling-off period was introduced as part of the reforms then even those who opted-out of guidance would have to wait to move their money to their chosen provider.
“Given this proposal would cause clear consumer detriment with potentially little benefit, we strongly urge the regulator to reconsider.”