Tweaks to "stronger nudge" requirements

The Department for Work and Pensions (DWP) has confirmed the final rules requiring occupational pension schemes to give members a “stronger nudge” towards Pension Wise guidance.  From June 1, 2022, scheme trustees will need to ensure that members have taken or opted out of Pension Wise guidance before they flexibly access or transfer out their defined contribution (DC) benefits.

As we reported last month, the Financial Conduct Authority (FCA) has just finalised its own “stronger nudge” rules which will apply to contract-based DC schemes (personal and stakeholder pensions) from June 1, 2022.

Industry feedback stressed that it would be confusing to members if there were discrepancies between the two sets of rules.  The DWP has attempted to address this.  For example, the two regimes now have the same start date (the DWP rules were originally going to apply from April) and members of trust-based schemes wanting to opt out of guidance on a transfer will no longer have to give a separate, special notification.

Trustees will also be pleased that the DWP has tried to make the requirement to book Pension Wise appointments for members less cumbersome than under the original proposals.

Although there is now a longer lead time to prepare for “stronger nudge”, trustees should liaise with their administrators now to make sure their scheme’s administration processes will be updated in good time.  The Pensions Regulator has also promised guidance on these new requirements.  Trustees and administrators should review this when available.