June 17, 2021

Volume XI, Number 168

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DWP Sets Out “Stronger Nudge” Regime to Protect Savers and Rein in Pension Freedoms

Following successful trials, the Department of Work and Pensions (“DWP”) announced proposals last  Wednesday to introduce a “Stronger Nudge” regime, as part of a package of measures aimed at helping savers make better-informed decisions when it comes to accessing their pension savings, and to further protect them from scams.

The Stronger Nudge Regime

Under plans laid out in the DWP’s recent statement of policy intent, occupational pension schemes will be required to “nudge members” towards taking guidance from Pension Wise at the point at which they seek to access their pension. The Pension Wise service provides free, impartial guidance to over 50s, to help them understand what options are available to them.

Members of defined contribution pension schemes have had the ability to access their pension benefits from the age of 55, since legislation introducing Pension Freedoms came into force in 2015. Individuals have since had greater choice when it comes to accessing and dealing with their pension savings.

The “Stronger Nudge” regime will be implemented following a 19 week trial, which ran until February and was conducted on a sample of 4,135 pension holders. The trial was “successful at increasing the proportion of pension holders booking and attending a Pension Wise appointment compared to business as usual.”    

According to the DWP, demand for the Pension Wise service continues to grow. Over 200,000 telephone appointments, face-to-face appointments, online sessions and other interactions were delivered by the Money and Pensions Service in 2019/2020 – more than triple those delivered when it was launched in 2015.

Guy Opperman, Minister for Pensions and Financial Inclusion, has said that the regime will “advance the Government’s goal of ensuring that people have the necessary support and information to make informed choices about their financial futures” and that he wants “taking guidance to become a natural part of the journey savers embark on when making decisions about their pension pots.”  He further noted that “these measures will help protect consumers from scams.

The statement of policy intent ends by setting out the next steps for action, which will be to introduce the required regulations to implement the regime. The FCA will also consult on the rules implementing the regime in due course.

Comment

Pensions professionals should take note of this statement of policy intent, and watch out for the introduction of the regime to ensure that they are compliant.

For critics of the Pension Freedoms, this will be a welcome change. As the statement itself notes, the “Stronger Nudge” regime strikes a balance between encouraging people to take guidance when making decisions in relation to their pensions, without “removing the element of personal choice” which the Pension Freedoms allow for.

The new regime will also help to tackle the issue of pension scam activity, which is particularly relevant now after XPS Pensions Group found scam warning signs in half of post-Lockdown pension transfers.

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 307
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About this Author

Garon Anthony Litigation Attorney Squire Patton Boggs Birmingham, UK
Partner

Garon is a partner in the Litigation Practice Group. He advises clients across the full range of commercial dispute issues, including cyber liability/data breach, professional negligence, banking, pensions and insurance.

Garon regularly acts for clients who are subject to investigations or disciplinary proceedings by national and international regulators, including most recently the Financial Conduct Authority, the Financial Reporting Council and the Dubai Financial Services Authority.

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44 121 222 3507
Mariyam Harunah Financial Services Litigation Attorney Squire Patton Boggs Birmingham, UK
Associate

Mariyam regularly acts for a diverse client base, including, SMEs, FTSE 100 and 250 corporations, public bodies, developers, insurers and individuals.

Mariyam has experience advising on a wide range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, misrepresentation, defamation, professional negligence, debt recovery and insurance.

44 121-222-3175
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