Consultation outcome

Government response: Stronger Nudge to pensions guidance

Updated 17 January 2022

This is the government response to the July 2021 consultation on proposed regulations implementing a Stronger Nudge to pensions guidance

Ministerial Foreword

Pensions are one of the most important long-term investments that an individual will make. I am committed to ensuring that when preparing for retirement savers are encouraged to access appropriate pensions guidance. The free and impartial guidance provided by Pension Wise, for individuals aged 50 or above, and with a Defined Contribution (DC) pension, will help them make informed choices about their financial futures. Pension Wise is not for everyone, but I am determined to make it even more accessible for those who do want it.

I have previously welcomed the results from the Stronger Nudge trials that demonstrated ‘nudging’ people to take guidance significantly increased the take-up of Pension Wise.

Building on this work, in July 2021, the Department for Work and Pensions launched the Stronger Nudge to pensions guidance consultation, seeking views on our draft Regulations to implement the stronger nudge to pensions guidance. I am grateful to the support, suggestions, and information provided by those individuals and organisations that responded to our consultation.

Following this consultation, we are bringing forward regulations to ensure that individuals in scope are made aware of Pension Wise guidance when they seek to access their DC pension savings, and that trustees and managers of occupational pension schemes facilitate the booking of a Pension Wise appointment as part of the application process. Where members do not wish to take guidance, we have taken steps to ensure that this will be an active and considered decision.

The Stronger Nudge provisions are an important measure designed to help people make informed decisions about accessing their pension savings. These measures will help protect consumers and encourage use of the free, impartial guidance that is available to help them make informed decisions about the options available to them.

Guy Opperman MP Parliamentary Under Secretary of State (Minister for Pensions and Financial Inclusion)

Introduction

1. The regulations to introduce the Stronger Nudge to pensions guidance aim to increase take up of pensions guidance provided by Pension Wise or its delivery partner (“Pension Wise guidance”), by requiring trustees and managers to ensure that members and their survivors with rights or entitlements to flexible benefits (relevant beneficiaries) have either received or opted out of receiving appropriate pensions guidance before proceeding with their application to receive, or transfer with the intention of receiving, flexible benefits. It will require trustees and managers to present taking pensions guidance as a normal part of the application process and require members (and other relevant beneficiaries) to make an active choice if they wish to opt out of receiving guidance.

2. These regulations utilise the powers conferred by section 19 of the Financial Guidance and Claims Act 2018 (which inserts a new section 113B in the Pension Schemes Act 1993). This requires the Secretary of State to make regulations placing duties on trustees and managers of qualifying occupational pension schemes to:

• where a scheme member (or other relevant beneficiary) makes an application to transfer pension rights or start receiving pension benefits, refer them to appropriate pensions guidance, and explain the nature and purpose of the guidance; and
• before proceeding with an application, ensure the member (or other relevant beneficiary) has either received the guidance or opted out of receiving it

3. The Stronger Nudge trials, which were completed in February 2020, tested the effect of presenting taking Pension Wise guidance as a normal part of the process, and making it easier to book an appointment, when receiving or transferring flexible benefits.

4. On 28 October 2020 the government published a statement of policy intent outlining our proposals for implementing a Stronger Nudge to pensions guidance. In this we proposed to implement the nudge that was tested, across all channels.

5. That intention was taken forward in the July 2021 public consultation on draft regulations. This consultation sought views on the draft regulations which would, amongst other things, amend the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 (“the Disclosure Regulations”) to introduce new requirements concerning the Stronger Nudge to pensions guidance.

6. The consultation was held between 9 July 2021 and 3 September 2021. The Department for Work and Pensions (DWP) asked 20 questions on the proposed Regulations implementing a Stronger Nudge to pensions guidance. We received 343 formal written responses from a range of individuals and organisations.

7. The majority of responses strongly supported our intention to increase the take up of Pension Wise guidance. Respondents differed on their responses to the specific questions posed.

8. This document summarises the responses and evidence we received. It also includes the government’s response to these points and a summary of changes to our proposals in response to our consultation.

9. The government would like to thank all respondents for taking the time to respond to this consultation, and for sharing their views which we have taken into consideration when finalising the Occupational and Personal Pension Schemes (Disclosure of Information) (Requirements to Refer Members to Guidance Etc.) (Amendment) Regulations 2022. A list of respondents can be found at Annex A.

10. The Occupational and Personal Pension Schemes (Disclosure of Information) (Requirements to Refer Members to Guidance Etc.) (Amendment) Regulations 2022 (“the Amendment Regulations”) will be published on legislation.gov.uk.

11. The impact assessment for the Amendment Regulations will be published on legislation.gov.uk to coincide with the laying of the Amendment Regulations.

12. As private pensions policy is reserved in Wales and Scotland, the Stronger Nudge to pensions guidance consultation, and this response, applies to Great Britain.

13. The government is grateful to the Pensions Regulator, the Financial Conduct Authority (FCA) and the Money and Pension Service (MaPS) for their support, collaboration and advice on the development of these Regulations and guidance.

Summary of Consultation Questions and Responses

Chapter 1: Delivering the Stronger Nudge to Guidance

14. The proposals outlined when and in what circumstances the Stronger Nudge to pensions guidance would be required and the steps that trustees and managers are required to take to meet their duties to refer relevant beneficiaries to guidance.

15. The draft Regulations proposed that the Stronger Nudge to pensions guidance must be given when trustees and managers receive an application to receive, or transfer with the intention of receiving, flexible benefits. The Stronger Nudge should not apply to applications that are not with the intention of receiving flexible benefits, such as transfers for the purpose of consolidation only.

16. It was proposed that, for applications in scope, trustees and managers would be required to offer to book a Pension Wise appointment on behalf of the relevant beneficiary, at a time and date of their choosing.

17. In the case of a transfer, it was also proposed that the requirements should apply to trustees and managers of a ceding scheme, namely the scheme in which the beneficiary has accrued rights to flexible benefits.

18. The consultation asked 2 specific questions in relation to the triggers for and delivery of the Stronger Nudge to pension guidance:

• Question 1. Do you agree with our proposed approach to defining when the Stronger Nudge should be delivered? If not, what changes do you consider necessary?

• Question 2. Do you agree with our proposed approach to appointment bookings? If not, what changes do you consider necessary?

Consultation Feedback

19. Many responses agreed with the goal of facilitating the booking of a Pension Wise appointment as part of the application process, and with our approach to defining when trustees and managers should deliver this.

20. Some respondents raised concerns that directing beneficiaries to Pension Wise at the point that they make a request to receive their pension savings comes too late in the journey. They argue that beneficiaries are more likely to engage with Pension Wise before they have made a decision about receiving their pension savings, and that ideally beneficiaries would be referred to Pension Wise before this point.

21. Some respondents, conversely, argued that the Stronger Nudge requirements should apply only to requests to receive pension savings, and should not apply to any transfer requests. They argue that Pension Wise is most helpful for beneficiaries making decumulation decisions, and so should only be delivered at the point that beneficiaries in scope are making a decision about decumulation, rather than transfer.

22. Others argued that the proposal to deliver the Stronger Nudge only to those transfer requests made by qualifying beneficiaries aged 50 or over will direct beneficiaries to Pension Wise too early, and that we should consider exempting transfer applications made by beneficiaries who have not yet reached Normal Minimum Pension Age from the scope on the Stronger Nudge requirements.

23. Where the Stronger Nudge does apply to transfer requests, some respondents argued that it should not be the trustees and managers of ceding schemes in a transfer that delivers the Stronger Nudge. The receiving scheme, which the member makes an application to transfer their rights to benefits into, may be more suited to deliver the Stronger Nudge requirements, as the receiving scheme is contacted first in many cases. Concerns were also raised that requiring the trustees and managers of ceding schemes to deliver the Stronger Nudge could result in beneficiaries being nudged multiple times for the same transfer application.

24. Most respondents agreed with the proposed mechanism for appointment booking, describing it as clear, sensible, and flexible. Some respondents requested additional clarity on how these requirements would be fulfilled across different methods of communication, how attendance at a Pension Wise appointment would be verified, and how to manage the cancellation of appointments.

25. Some respondents argued that the approach to booking a Pension Wise appointment would be lengthy and time consuming, believing our approach would require providers to have access to beneficiaries’ diaries.

26. Two respondents pointed out that the current wording of the draft Regulations may have the effect of requiring the Stronger Nudge to be delivered when beneficiaries request to transfer rights other than rights to flexible benefits

DWP View

27. DWP wish to give trustees and managers the freedom to deliver the Stronger Nudge to pension guidance earlier in the process where appropriate, before the receipt of an application form, and so have allowed trustees and managers to deliver the Stronger Nudge on both the receipt of an application or a communication in relation to an application. This approach will mean that, where beneficiaries contact a pension scheme to discuss their options, the scheme trustees and managers will be able to deliver the Stronger Nudge to guidance at this point and will not need to deliver this again once they receive an application form.

28. Scheme trustees and managers will be required to facilitate the booking of a Pension Wise appointment as part of the application process. However, we have adapted our regulations to better reflect that across different customer journeys this may take different forms. In a postal or online journey, for instance, the offer to book may be satisfied by providing a phone number for beneficiaries to call if they wish the scheme to book an appointment on their behalf, alongside details on how the beneficiary may book an appointment themselves. Trustees and managers will not be required to organise the booking of an appointment and coordinate diaries via a purely postal or online route.

29. We believe that transfers are a valuable point to be referred to guidance, as they mark a point where a beneficiary is engaged in thinking about their pensions. However, we do not wish to put barriers in the way of beneficiaries making decisions to consolidate their pensions and recognise that Pension Wise. As such, we have decided to disapply the requirement to opt out in a communication solely for the purpose of opting out in relation to transfer requests. This means that, whilst beneficiaries in scope will receive the Stronger Nudge on requests to transfer flexible benefits, they will not be required to opt out of Pension Wise guidance in a separate interaction. This, we believe, best meets our goal of referring beneficiaries to Pension Wise as early as is practical, whilst recognising that for some beneficiaries transferring a pot from age 50 a Pension Wise appointment may not be beneficial.

30. To prevent beneficiaries from receiving the Stronger Nudge to pensions guidance repeatedly for the same transfer application, we have disapplied the requirement for trustees and managers of ceding schemes to deliver the Stronger Nudge, where the receiving scheme has already delivered the Stronger Nudge to pension guidance, and the beneficiary has opted out or received Pension Wise guidance. This can be evidenced by verbal or written confirmation given by or on behalf of the beneficiary. Trustees and managers of occupational pension schemes will only be required to deliver the Stronger Nudge in relation to applications to transfer when beneficiaries request to transfer out of the scheme. However, should they wish to deliver the Stronger Nudge in relation to applications to transfer in flexible benefits, trustees and managers of ceding occupational schemes involved in that particular transfer request would not be required to deliver the Stronger Nudge.

31. For transfer requests, we have altered the drafting to ensure it is only requests to transfer rights to flexible benefits which will trigger the Stronger Nudge to pensions guidance requirements.

Chapter 2: Opting Out of Guidance and Proceeding with the Application

32. We proposed that opting out of receiving Pension Wise guidance must be done through a separate, active communication with the trustees or managers if a specified exemption does not apply. This could be a phone call, email, letter, postal form, or digital form which is separate from the individual’s initial contact to receive (or transfer for the purpose of receiving) their pension benefits and from the providers’ offer to book a Pension Wise appointment.

33. The intention is to ensure that due thought is given to the benefits of Pension Wise guidance before receiving pension benefits and that any decision to opt out of receiving guidance is a considered one.

34. We proposed that trustees and managers of schemes in scope can only proceed with the application to transfer or receive pension benefits once beneficiaries have either confirmed receipt of Pension Wise guidance or opted out of receiving Pension Wise guidance. Until this point trustees and managers should not take additional steps to proceed with the application concerned.

35. The consultation asked 2 specific questions in relation to the opt-out process and the restriction on proceeding with the application:

• Question 3. Do you agree with proposed approach to requiring an opt-out in a separate interaction? If not, what changes do you consider necessary?

• Question 4. Do you agree with our proposed approach to prevent trustees and managers proceeding with the application until they are in receipt of confirmation that the individual has opted-out or received appropriate pensions guidance? If not, what changes do you consider necessary?

Consultation Feedback

36. Many respondents raised concerns that introducing a requirement for a beneficiary to opt out in a separate interaction may cause frustration on the part of the member, and greater costs to business, without sufficient benefit to justify this. However, other respondents also described the separate opt-out process as necessary to ensure due consideration is given to the offer of Pension Wise guidance and to prevent opting out from becoming the path of least resistance for beneficiaries.

37. Some respondents argued that we should require the opt out to be delivered in writing.

38. There was disagreement from respondents on other issues, with some arguing that MaPS should record opt-outs, and some agreeing that providers are best suited to manage this process. There were requests for further clarification on what constitutes a separate opt-out, and how this translates into different methods of communication, particularly online and postal journeys.

39. On the issue of proceeding with the transaction, the majority of respondents agreed with our approach.

40. Some raised concerns about what evidence would be required that a beneficiary has opted out or attended a Pension Wise appointment.

41. Some respondents raised concerns regarding what information could be communicated with beneficiaries, and whether beneficiaries would be allowed to receive quotes or other important information.

DWP View

42. We do not believe that the steps required by the enhanced opt-out are onerous for beneficiaries and we believe it is important that, before beneficiaries take a final decision to receive pension benefits, they give due consideration to the offer of Pension Wise guidance, rather than opting out of guidance by default. However, as mentioned in paragraph 29, we intend to disapply the requirement to opt out in a separate transaction for transfer requests.

43. We have defined an opt-out notification as a communication solely for the purpose of opting out, and not for any other purpose, in order to clarify what is meant by a requirement to opt out in a separate interaction. We want the decision to opt out to be separated from other decisions that the beneficiary may have to take as part of the application process, and so the decision to opt out should come in a communication that is solely for this purpose. This could be a separate phone call, separate digital form, or separate postal form.

44. This is not an exhaustive list of options for how the opt-out notification may be given. It may be appropriate for trustees and managers to take a consistent approach to the managing of opt-outs (for example, they could direct beneficiaries to complete an online form in order to opt out). For an online journey, the opt out could be recorded within the online application process, provided the decision to opt out is separated from other decisions that the beneficiary must make. For example, if the online application process directed beneficiaries towards a separate form for them to complete an opt-out, we believe this would satisfy the intent of the Amendment Regulations.

45. In a postal journey, trustees and managers may include an opt out form alongside an offer to book a Pension Wise appointment on a beneficiary’s behalf and any other additional information on options they may send out.

46. We can clarify that trustees and managers do not need further evidence, beyond the verbal or written confirmation of the beneficiary, that they have either received appropriate guidance from Pension Wise or opted out of receiving such guidance. We do not believe it is appropriate to require MaPS to provide evidence that beneficiaries have attended a Pension Wise appointment, as our regulations do not mandate the attendance at such an appointment.

47. We do not see the merit in MaPS recording the opt-out, and then passing it on to the scheme trustees and managers, rather than this opt-out being recorded by the trustees and managers directly.

48. Whilst our proposals are that pension scheme trustees and managers must not proceed with the application in scope, or take additional steps to progress such an application, once the Stronger Nudge has been delivered, we do not believe this prevents schemes from providing information, such as quotes, to the beneficiary before they deliver the Stronger Nudge. We have removed this requirement from the regulations, due to this provision being set out in section 113B of the Pension Schemes Act 1993.

Chapter 3: Exemptions

49. We proposed to exempt those beneficiaries who request to transfer their rights to flexible benefits for the sole purpose of consolidation from the scope of the Stronger Nudge requirements.

50. We proposed further exemptions for those relevant beneficiaries who have already received Pension Wise guidance or regulated financial advice on the proposed transaction within the last 12 months from the requirement to opt out in a separate interaction.

51. We also proposed to exempt those beneficiaries who are applying to receive their pension benefits as a Serious Ill Health Lump Sum, as defined in the Finance Act 2004.

52. In the consultation document, we explained that we had not proposed to exempt small pension pots from the Stronger Nudge requirements at this stage. However, we asked for views on this point.

53. The consultation asked 3 specific questions in relation to exemptions:

• Question 5. Are the proposed exemptions sufficient? If not, what changes do you consider necessary?

• Question 6. Is an exemption for small pots necessary? If so, how should a small pot be defined?

• Question 7. Will our proposed exemption for those accessing their pension as a Serious Ill Health Lump Sum cover all those who should be exempted from the enhanced opt-out on health grounds? If not, what changes do you consider necessary?

Consultation Feedback

54. Respondents mostly agreed with our proposed exemptions.

55. Some respondents disagreed with the proposed exemptions, arguing we should not exempt transfers for the purpose of consolidation from the Stronger Nudge requirements, or those who have received regulated financial advice or Pension Wise guidance from the requirement to opt out in a communication solely for the purpose of opting out.

56. Others argued our exemptions should go further, such as exempting those who have received regulated financial advice or who are accessing a serious ill health lump sum from the Stronger Nudge requirements entirely, so that they do not receive the offer to have a Pension Wise appointment booked on their behalf.

57. Some respondents pointed out that beneficiaries may qualify for a serious ill health lump sum but not choose to receive their savings in this manner and, if so, should still be exempt from the requirement to opt out of receiving pensions guidance in a separate communication. Some respondents raised concerns that those accessing their pension savings due to ill health, but who are under 50, will not be eligible for Pension Wise guidance.

58. On the issue of small pension pots, respondents were divided. A number of respondents recommended that we introduce an exemption for small pots, arguing that guidance may be less useful to beneficiaries with smaller pots, or because it may discourage beneficiaries from consolidating small pots. However, respondents were significantly divided on where the threshold for what constitutes for small pots should be set, with answers ranging from under £100, to under £30,000.

59. A number of respondents argued that a small pension pot exemption would not be appropriate, arguing that a beneficiary with a small pot may still benefit from Pension Wise and that beneficiaries who do not wish to receive Pension Wise may still opt out.

60. Additional exemptions were suggested by respondents, to cover hybrid pension schemes (schemes which are neither full defined benefit nor full defined contribution schemes) and those transferring to overseas schemes. Some respondents also asked for further clarification on our exemption for transfers for the purpose of consolidation, arguing that this should be broadened to include those transferring for other reasons.

DWP View

61. We do not wish to place artificial barriers in the way of consolidation of pension pots, so we have decided to exempt all requests to transfer flexible benefits from the requirement to opt out in a separate interaction. This means that transfers of flexible benefits by beneficiaries who have small pension pots, or wish to transfer to overseas schemes, will be exempt from the enhanced opt-out requirements.

62. We do not see it as necessary to exempt those beneficiaries with small pots from the Stronger Nudge requirements entirely, as we believe the offer of having a Pension Wise appointment booked will still have value, and the beneficiary is best placed to make the decision as to whether they take up this offer.

63. We also do not think it is necessary to exempt requests to receive small pension pots from the requirement to opt out in a communication solely for the purpose of opting out. If a beneficiary is choosing to receive their pension savings, we believe it is appropriate to ensure that they make a considered decision before doing so.

64. We have expanded the scope of our exemption for transfers for the purpose of consolidation to include any transfer of flexible benefits where receiving flexible benefits is not one of the purposes. This means that where beneficiaries are consolidating or transferring without the intention of accessing flexible benefits, it will not be required for them to be referred to Pension Wise guidance or opt out of receiving Pension Wise guidance.

65. We have made necessary changes to the Amendment Regulations in order to ensure those who qualify for a Serious Ill Health Lump Sum are exempt from the enhanced opt-out requirements.

66. We have also made changes to how the Amendment Regulations define a relevant beneficiary to ensure that those beneficiaries who apply to receive their pension savings from their scheme before age 50, for example due to ill health, are still referred to Pension Wise guidance. Members accessing their pension savings early for ill health reasons, and survivors of members, are eligible for the Pension Wise service even when they are under age 50.

Chapter 4: Interactions, Amendments, and Record Keeping

67. Our proposals included approaches for how the requirements stipulated by the Stronger Nudge requirements may interact with upcoming proposals for Pension Savings Safeguarding appointments, as well as proposing amendments to the existing Disclosure Regulations 2013 to disapply certain requirements where the Stronger Nudge requirements apply.

68. Regulation 2 was proposed to disapply the requirement for trustees and managers in scope to carry out a relevant beneficiary’s transfer request within the specified period of 6 months of the date of the transfer application or giving of a transfer notice, until the Stronger Nudge requirements have been fulfilled.

69. We also proposed certain record keeping requirements for trustees and managers in scope, and an amendment to the definition of pensions guidance to update it, following the formation of the Money and Pensions Service.

70. This chapter will address the responses to the following 4 questions from the consultation:

• Question 8. Do you believe our proposed approach to record keeping is proportionate? If not, what changes do you consider necessary?

• Question 9. Do you agree with our proposed approach for coordinating the Stronger Nudge and Scams Guidance appointments? If not, what changes do you consider necessary?

• Question 10. Do you foresee any problems with the interaction between the Stronger Nudge and existing signposting provisions? If so, what changes do you consider necessary?

• Question 11. Are you content that regulation 2 successfully achieves its purpose? If not, what problems do you foresee and what changes do you consider necessary?

Consultation Feedback

71. The majority of consultation respondents agreed with our proposed amendments to existing signposting provisions, and the approach we have taken to coordinating the Stronger Nudge requirements and the Pension Savings Safeguarding appointments

72. A number of respondents argued that it would be preferable for the Pension Savings Safeguarding appointments, and the Pension Wise appointments, to be combined into one appointment.

73. Respondents agreed with our approach to updating the definition of pensions guidance, and for disapplying the statutory right to transfer provided for in the Pensions Schemes Act 1993 until the Stronger Nudge requirements have been fulfilled.

74. One respondent believed that our definition of ‘pensions guidance’ allowed anybody to deliver pensions guidance and did not restrict this to The Money and Pensions Service (MaPS). Another argued that our amendment of certain provisions of the Pension Schemes Act 1993 as set out in regulation 2 of the draft Regulations was not within the powers permitted by the statute.

75. On record keeping, the majority of respondents supported our approach. Some disagreed with record keeping requirements where they disagreed with the aspect of our proposals this referred to. For instance, where a respondent disagreed with our approach to opt-outs, they sometimes disagreed with our proposal to record opt-outs. Some suggested we should go further, by requiring record keeping of reasons for opt-outs, and correlations between take up of guidance by age or gender. One respondent suggested that we should use our record keeping requirements to gain insight into “who is receiving advice, how they are receiving it, and what the benefits are”.

76. Others asked what the purpose of mandating record keeping requirements was and suggested that we stipulate what data we wish to collect from firms, rather than what records we want them to keep.

DWP View

77. We do not believe it is practical to combine the Pensions Safeguarding and Pension Wise appointments into one appointment. These two appointments serve different purposes and have different scopes. The referral to Pension Wise is not a requirement which obliges beneficiaries to receive Pension Wise guidance, and so beneficiaries are able to opt-out of this. This referral is also targeted only at beneficiaries considering methods of receiving their flexible benefits. The Pension Savings Safeguarding appointments, in contrast, are mandatory, and aimed at informing beneficiaries about the risk of Pension Scams in relation to transferring pension savings. Whilst there may be instances in which beneficiaries attend both appointments and so the potential for confusion over the necessity of both may arise, we believe the best approach here is for the purpose of each appointment to be clearly explained. This explanation will be a requirement for both sets of Regulations on Stronger Nudge and Pensions Savings Safeguarding. Putting two different appointments (one of which is mandatory in order for the transfer to be completed, and one of which is not, and both of which have different purposes) into the same appointment, is liable to cause greater confusion.

78. We continue to review ways in which it may be possible to gain further information on the behaviour of pension savers. However, we do not believe it is appropriate to use the Amendment Regulation to require schemes to record this information. The record keeping requirements we have stipulated will enable schemes to record data for establishing the effect of the Stronger Nudge to pensions guidance. The government does not currently plan to require reporting of this information.

79. We can confirm that our definition of pensions guidance refers to pensions guidance delivered by the single financial guidance body or its delivery partners.

80. We have made additional amendments to the Amendment Regulations where suggestions regarding wording were made.

Chapter 5: Costs

81. We asked a series of additional questions to help us better understand the potential impacts of the draft Regulations on trustees and managers of occupational pension schemes in scope. These were:

• Question 12. What do you anticipate will be the one-off impact of implementing the Stronger Nudge in to each channel (phone/post/digital) you offer? Where costs are incurred, please provide an estimate and any information you feel would be useful to us in understanding these costs

• Question 13. What do you anticipate will be the on-going impact of implementing the Stronger Nudge in to each channel (phone/post/digital) you offer? Where costs are incurred, please provide an estimate and any information you feel would be useful to us in understanding these costs

• Question 14. Where costs are incurred, would you expect the cost to be absorbed, passed on to employers, or passed on to individual members?

• Question 15. Do you anticipate any benefits to your business from implementing the Stronger Nudge? Please provide a monetary value where possible

• Question 16. Do you anticipate any wider non-monetised impacts from the Stronger Nudge?

82. We appreciate the information and comments provided by respondents to assist us in anticipating cost impacts. A Regulatory Impact Assessment has been undertaken by the department and will be published on legislation.gov.uk to coincide with the laying of the Amendment Regulations.

Chapter 6: Other, Statutory Review, and Equality

83. We asked a series of additional questions, aimed at collecting information on any points not covered in the above questions, including any additional Equality Impacts our proposals would have on protected groups.

84. Our proposals did not include a Statutory Review Provision, as we do not believe one to be necessary given the projected impacts of the policy. However, we asked respondents for their views on this point:

• Question 17. Do you believe there are reasons to include a statutory review provision in the proposed regulations?
• Question 18. Do you consider the proposed regulations achieve the policy intent?
• Question 19. Do you foresee any unintended consequences in our proposed approach?
• Question 20. Do you have any comments on the impact of our proposals on protected groups and/or views on how any negative effects may be mitigated?

Consultation Feedback

85. Respondents agreed that our draft Regulations broadly achieved the proposed policy intent, though some raised helpful points regarding the drafting of particular provisions. For example, some noted that our draft Regulations appeared to unintentionally exempt transfers for the purpose of consolidation only when these would result in pension benefits being transferred into other occupational pension schemes.

86. A number of responses advocated that we implement an approach in which members automatically have a Pension Wise guidance appointment booked on their behalf, at the age of 50.

87. Some responses raised the potential additional costs caused by differences between our draft Regulations and the FCA’s corresponding rules. Respondents provided different judgements of the extent of these differences. The differences mentioned by respondents included: the timing for when the Stronger Nudge would be delivered, the opt-out process, whether beneficiaries can proceed without having opted out or received guidance, record keeping, how advised clients are treated, how the referral to Pension Wise guidance would interact with Pensions Savings Safeguarding appointments, which pension scheme delivers the Stronger Nudge and whether there is an exemption in place for beneficiaries with small pension pots.

88. A number of responses raised concerns about the proposed commencement of the Stronger Nudge regulations, for a coming into force date on 6 April 2022. Some respondents argue that it is necessary to have six months between the date that the Regulations are published and come into force.

89. Some respondents raised queries around whether MaPS had the capacity to cope with the expected increase in the take up of Pension Wise guidance, and what effects it would have on the waiting times for the service.

90. Respondents provided helpful additional comments on equality impacts, which we have utilised in undertaking our Equality Analysis for the Stronger Nudge policy.

91. Respondents provided differing views on the necessity of a Statutory Review Provision. Many respondents supported the inclusion of such a provision in the Regulations, arguing that it is important to review the effectiveness of the policy. However, others did not believe a statutory review provision would be appropriate.

DWP View

92. Automatically booking a Pension Wise appointment for members aged 50 is not within the scope of this consultation and would not be possible under the powers conferred by section 19 of the Financial Guidance and Claims Act 2018. We will continue to investigate and review ways of increasing engagement with guidance services both before and at retirement.

93. Many of the alleged differences between the FCA’s rules and our regulations we do not consider to be genuine points of difference. For instance, whilst our consultation asked for views on small pension pots, and the interaction between Pensions Safeguarding appointments and our Stronger Nudge proposals, there is no difference between the requirements of the FCA’s and DWP’s approaches here. Some differences are simply a matter of the different legislative context in which the respective organisations operate. For instance, on the timing of the Stronger Nudge, we are both amending different pieces of legislation, which means the relevant wording we use will consequentially differ. However, both our Regulations and the FCA’s rules target the point at which a beneficiary enquires about receiving flexible benefits, and so there is no real-world contradiction in the requirements that they place on schemes in scope.

94. The Stronger Nudge regulations will have a coming into force date of 1 June 2022.

95. As mentioned in paragraph 29, we have removed the requirement for beneficiaries to opt out in a separate communication from transfer requests, which brings our Regulations and the FCA’s rules into closer alignment. The difference between our Regulations and the FCA’s rules on the requirements to opt out in a separate interaction in relation to requests to access remains unchanged. However, schemes concerned about running two different systems will be able to run one system that satisfies both sets of requirements.

96. We do not believe a Statutory Review Provision will be necessary. The net annualised impact on business is less than +/- £5 million, which provides reason as to why a review provision would be inappropriate.

Chapter 7: Summary of Key Changes

97. This chapter will summarise the key policy issues raised by the consultation respondents, and the steps we have taken to address those concerns. This chapter also contains a summary of the changes made to the Amendment Regulations as a result of the consultation. Additional changes to simplify and clarify the regulations, not summarised here, have also been made.

98. Table of key issues and DWP response.

Table of key issues and DWP response

Issue	DWP response
That additional exemptions were needed to ensure the Stronger Nudge is best targeted at those most likely to benefit from Pension Wise guidance. A range of exemptions were proposed by respondents, including an exemption for small pots, an exemption on all transfers, or an exemption for 50 to 55 year olds.	We considered a range of possibilities for addressing these issues. We believe that the most appropriate method for balancing the need to ensure individuals are informed with the goal of ensuring beneficiaries receive the right guidance at the right time is to exempt requests to transfer only from the requirement to opt out in a separate interaction.
That the requirements for delivering the Stronger Nudge were too onerous, potentially requiring trustees and managers to spend a long time coordinating diaries with individuals over post.	Scheme trustees and managers must offer to book a Pension Wise appointment on the behalf of the beneficiary and take reasonable steps to fulfil this offer. However, trustees and managers may fulfil this by including a contact number for beneficiaries that wish to take up this offer, alongside details on how beneficiaries may book the appointment themselves.
That the triggers for the Stronger Nudge may require the Stronger Nudge to guidance to be given too late in the process.	We have updated the regulations to ensure that trustees and managers are able to deliver the Stronger Nudge to guidance as early as possible in the process.
That there were differences in the FCA and DWP’s proposals.	We have introduced an exemption to disapply the requirement trustees and managers of ceding schemes to deliver the Stronger Nudge, where a receiving scheme has done so, and disapplied the requirement to opt out in a separate interaction on transfer requests.
That the requirement to opt out in a separate interaction is unclear or requires greater clarity.	We have introduced additional clarity as to how any opt-out of pensions guidance must be delivered and disapplied the requirement to opt out in a separate interaction on transfer requests. We do not believe that the opt out requirements, on requests to access, are onerous.

99. Summary of differences between original proposed regulations, and redrafted regulations.

Summary of differences between original proposed regulations, and redrafted regulations

Original proposals	Revised proposals
The Stronger Nudge requirements are triggered by receipt of an application from a relevant beneficiary.	The Stronger Nudge Requirements are triggered by receipt of an application or communication in relation to an application made by a relevant beneficiary (RB).
The Stronger Nudge requirements apply to an application to transfer rights accrued by the RB.	The Stronger Nudge requirements apply to an application to transfer rights to flexible benefits accrued by a RB.
The Stronger Nudge requirements do not apply when an application is made to transfer any or all of the RB’s rights to flexible benefits accrued under the scheme to a different occupational pension scheme which does not provide flexible benefits; or to transfer or all of the RB’s rights to a different occupational pension scheme for the sole purpose of consolidating the RB’s pension entitlements.	The Stronger Nudge requirements do not apply when a request is for any purpose other than accessing flexible benefits.
Trustees and managers of ceding schemes must deliver the Stronger Nudge to all transfer applications in scope.	Trustees and managers of ceding Schemes do not have to deliver the Stronger Nudge where a receiving scheme has already done so.
Trustees and managers in scope must offer to book a Pension Wise appointment on the RB’s behalf, and only where the RB declines this offer may provide details of how the RB may book a Pension Wise appointment.	Trustees and managers in scope must offer to book a Pension Wise appointment on the RB’s behalf, and where the RB declines this offer, or where they are unable to book an appointment despite taking reasonable steps, may provide details of how the RB may book a Pension Wise appointment.
An opt-out notification may not be given during the ensuing interaction with the trustees or managers.	An opt-out notification may only be given in a communication solely for the purpose of opting out of receiving appropriate pensions guidance.
The RB’s opt-out notification is not required to be in a communication solely for the purpose of opting out when the RB intends to apply for a Serious Ill health Lump Sum.	The RB’s opt-out notification is not required to be in a communication solely for the purpose of opting out when the RB qualifies for a Serious Ill health Lump Sum.
Requests to transfer in scope must opt out in a separate communication.	The RB’s opt-out notification is not required to be in a communication solely for the purpose of opting out when the request is to transfer rights to flexible benefits.
A relevant beneficiary is defined as a member age 50, or a survivor in relation to a member.	A survivor is included in the scope of the definition of ‘relevant beneficiary’. Transfers made by beneficiaries aged under 50 are exempt from the Stronger Nudge requirements.

Annex A: Respondents to the consultation

Respondent
ABI
Aegon
Age UK
AJ BELL
AON
Association of Member Directed Pension Schemes (AMPS)
AVIVA
B&CE
BAE Systems plc
British Transport Police
Capita
Centre for Aging Better
Creative group
Equiniti (EQ)
Fidelity International
Financial Services Consumer Panel (FSCP)
Financial Inclusion Commission (FIC)
Hargreaves Lansdown
HSadmin
Investment Life Assurance Group (ILAG)
ISIO
Just Group
Legal and General
Local Government Pensions Committee
Local Pension Partnership Administration (LPPA)
Low Incomes Tax Reform Group
Mercer
Money box
NEST
NOW Pensions
Pensions Administration Standards Association (PASA)
Pensions Management Institute (PMI)
Phoenix Group
PLSA
Railways Pension Trustee Company Limited (RPTC)
Retirement Lines
Sackers
Scottish Widows
Smart Pension
Society of Pension Professionals (SPP)
St. James’s Place plc
Surrey Pension Fund
The Pensions Ombudsman
TISA
Unison
Universities Superannuation Scheme (USS)
Willis Towers Watson
XPS

We also received 294 responses from individuals.