Aegon has called for greater joined up thinking on pension advice, warning that the separate proposals for pensions guidance from the Financial Conduct Authority and Department for Work and Pensions (DWP) risk creating confusion among consumers.
The DWP is currently consulting on introducing a stronger nudge to pensions guidance for members of trust-based schemes. The FCA’s consultation on this same topic for members of contract-based pensions closed last month.
According to Aegon, the many differences between the two proposals creates the potential for “customer confusion” as well as additional costs for providers.
Steven Cameron, pensions director at Aegon, said: “For those planning to access their pension flexibly without advice, a stronger nudge towards pensions guidance from Pension Wise can be very helpful. This applies equally to members of trust and contract-based pensions but in places the proposals from DWP and FCA are different, potentially leading to confusion for individuals who have both forms of pension and additional costs for providers offering both types of scheme.
“We’re urging DWP and FCA to work together to implement the ‘best of’ of their respective proposals.”
The FCA is recommending that providers provide a stronger nudge to all those over 50 who are transferring, while the DWP excludes the need to nudge for those doing so for the sole purpose of consolidation.
The FCA is also proposing providers need to arrange bookings with Pension Wise for clients who don’t want to do so themselves and offer to use the online booking service on behalf of the customer. In comparison, the DWP says trustees and administrators can, for online journeys, simply provide a link to the Pension Wise online booking service.
Aegon has called for the FCA to adopt the DWP approach, which it says allows a “streamlined digital approach without the backward step of needing human intervention in online journeys.”
In addition, the FCA has proposed placing an obligation to nudge on whichever of the ceding or receiving scheme is approached by the individual regarding transferring to access benefits. The DWP limits this to the member’s current scheme, which Aegon describes as preferable avoiding the need to introduce two separate nudge processes for transfers out and in.
Cameron added: “Individuals can formally opt out of receiving Pension Wise guidance. The DWP proposes this can’t be done during the initial ‘nudge’ interaction but kept separate.
“The FCA is less convinced of the need for this although is asking if a break period or minimum time lag would make sense. We’re concerned that separating opt out or breaking the journey may simply be seen by those who have already decided on accessing as an unhelpful barrier.
“The DWP is asking if there is a case for some de minimis pot size below which a nudge may not be required, while the FCA is silent on this. There could well be a case for excluding truly micro pots and if so, this should apply consistently to both trust and contract-based pensions.
“In other areas of pensions, there are encouraging signs that the DWP, the Pensions Regulator and the FCA are working together on the pensions consumer journey. We’re urging all parties to do likewise on stronger pension nudges.”
