FCA Plans For Stronger Nudge Towards Pension Guidance Via Pension Wise

In December 2021, the FCA published its Policy Statement: ‘PS21/21: The stronger nudge to pensions guidance: feedback on CP21/11 and final rules and guidance’. This statement summarises the feedback received from May’s Consultation Paper (CP 21/11) and provides final rules and guidance for firms to help implement Parliament’s desire to increase the take-up of the Pension Wise service and to thereby improve consumer financial awareness.

The FCA has stated that ‘improving outcomes’ in the pension market is a critical part, of their work on consumer investments. Their focus is on ensuring consumers have the right level of advice and guidance to help them make informed pensions decisions.

All relevant changes required to firms’ systems must be implemented by 1st June 2022.

PS21/21 – Who does this affect?

The policy statement primarily affects all pensions providers, including operators of self-invested personal pensions, but will also be relevant to other parties including:

  • Individuals and firms providing advice and information in this area
  • Distributors of retirement income products
  • Trade bodies representing financial services firms
  • Consumer representative bodies
  • Organisations with a particular interest in retirement
  • Individual consumers

Pension Wise guidance and the ‘stronger nudge’

Recognising that consumers have a great flexibility on deciding when and how to access their defined contribution (DC) pension savings, the Government set up Pension Wise as one source of free guidance for consumers. Currently, only a small proportion of consumers (14%) accessing their pension pot for the first time have used this guidance, which is a cause of concern for the FCA. Therefore, in the paper, the FCA is introducing targeted measures and final rules to increase Pension Wise take-up at the point of accessing DC savings, to help consumers choose the right pension guidance and support at the right time.

What do Firms need to do?

The FCA requires that, when a consumer has decided how they wish to access their pension savings, or to transfer rights to another pension provider for purposes of accessing their pension savings, pension providers (in the case of a pension transfer, the firm to whom the consumer intends to transfer their pension rights) must:

– Refer the consumer to Pension Wise guidance and explain its nature and purpose;

– Explain that the consumer can take regulated advice albeit that this will be at the consumer’s own expense; and

– Encourage the consumer to receive pensions guidance by offering to book a Pension Wise guidance appointment for the consumer or provide sufficient      information for a consumer to make an appointment on their own

This is also known as “Step 1”. Firms are not permitted to progress to “Step 2” (determination of relevant risk factors and provision of risk warnings) until they receive confirmation from the consumer that they have received guidance or advice or that they have opted out of receiving the guidance.

Following this initial step, if the consumer failed to attend the appointment or book their appointment, the firm must repeat the process in Step 1.

How can Complyport help?

Complyport can provide assurance over current or historical standards and liabilities.

We offer a pre or post sale review of the advice given to a client to transfer (or not to transfer) pension benefits to help to ensure that your advisers are providing the best advice possible to your clients. We will use our deep knowledge and experience to ensure that your current standards meet the rules, guidance and expectations of both the FCA and FOS and that they also represent good business practice.

We can also provide you with assurance over historical advice standards by undertaking a sample review of past business. This can help with any FCA requests or communications, PI insurance renewals or can simply provide comfort over potential liabilities that you have or may have inherited through acquisition.

Our Pension Review team brings over 70 years of combined consulting experience and has reviewed over 15,000 DB Pension Transfer and Pension Switching files across more than 25 clients,

About Complyport

Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.

Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.

We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.

Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.

Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.