01 July 2024
June marked the two-year anniversary of the introduction of the stronger nudge to pensions guidance, and new data from the Money and Pensions Service (MaPS) analysed by wealth manager, Quilter, reveals the change has had a disappointingly low impact thus far.
The stronger nudge to pensions guidance intended to normalise people taking Pensions Wise guidance as part of the process for applying to take or transfer their defined contribution benefits. Rather than choosing to seek guidance, people have to make an active choice not to seek it. However, the latest figures from MaPS reveals that despite an initial improvement, the impact of the stronger nudge to pensions guidance appears to have already started to wane.
For those looking to access their pension pot who have not taken professional financial advice, guidance can be invaluable. However, despite the stronger nudge, there are still relatively few people taking advantage of the support on offer and many who initially plan to make use of it are backing out prior to their appointment.
The first year following the implementation of the stronger nudge, there was a total of 124,316 guidance sessions attended from June 2022 to May 2023. This represents a 14% increase compared to the 109,054 sessions attended in the year prior to the stronger nudge being introduced. Comparatively, the new data from MaPS reveals that in the second year, the number of sessions has decreased year-on-year to 117,862, just 8% higher when compared to attendance figures before the enhanced nudge took effect.
There has been a considerable uptick in the number of guidance appointments arranged when compared to the year prior to the stronger nudge, up 24% in the same period in both 2022/23 and 2023/24. However, the difference with the appointments attended reflects a considerable increase in the proportion of no shows and cancellations, rising from 25% prior to the stronger nudge to 30.5% in 2022/23, and is expected to rise again to approximately 34% in 2023/24.
What’s more, figures from the Financial Conduct Authority’s retirement income market data show the total number of pension plans accessed for the first time in 2022/23 was almost 740,000, up from 705,666 in 2021/22. While we await data for 2023/24 to provide a clearer picture, this suggests that though the number of people accessing their pension savings year on year is rising, this is not being reflected in a continuous increase in Pension Wise appointments attended.
|
Month |
Appointments attended in year prior to Stronger Nudge |
Appointments attended in first year post Stronger Nudge |
Appointments attended in second year post stronger nudge* |
|
Total |
109,054 |
124,316 (14% increase**) |
117,862 (8% increase**) |
*Projected figure extrapolated from available data (June 2023-March 2024)
**Compared to June 2021-May 2022
One factor which could be contributing to the number of no shows and cancellations is the length of time customers often have to wait before being able to access a Pension Wise appointment. Since the introduction of the stronger nudge, there has often been more than a month’s wait for these appointments due to a lack of resource. Given the sessions are offered to those who have already decided they wish to access their money and are optional, it is unsurprising that many would not wish to wait.
Pension Wise guidance sessions can play a significant role in what is ultimately one of the most important financial decisions you can make, but at present there are simply not enough people making use of the support. The relatively disappointing uptake of these sessions shows that while the stronger nudge has increased the numbers of individuals seeking guidance it has not had the transformative impact of normalising people taking Pension Wise guidance. That may not have been a realistic expectation and the stronger nudge can be seen as only part of the solution.
For guidance to become normalised it has to be publicly championed in the mainstream media and that message to be repeated again and again. Marketing efforts have materially increased usage of other areas of the Moneyhelper pension guidance offering especially the usage of digital tools but when that marketing is not sustained usage falls away.
Jon Greer, head of retirement policy at Quilter, says:
“Accessing your pension funds is one of the biggest financial decisions you can make, and guidance can be invaluable for those who opt to go it alone. However, despite the stronger nudge, we are still seeing the minority of people attending Pension Wise guidance sessions.
“Though well meaning, the timing of the stronger nudge to pensions guidance comes when many people will already have decided to access their pension saving and have an idea of the action they wish to take. They may therefore view guidance as a barrier to their plans. However, there are likely a great number of people who are opting out and going ahead with their plans with no support at all which could have a serious impact on their financial wellbeing in later life.
“With Labour pledging to review pension policy, it may want to factor in the outcomes of the stronger nudge to guidance and whether it is effective, should it win the general election. While we continue to support the intention of the stronger nudge, the approach must be adapted to ensure more people are well informed and supported through what is one of the most significant financial decisions they will make in their lifetime.
“At present, the stronger nudge simply comes late in the process. A solution would be to help manage expectations by making it clear in pension wake-up packs that not only should people seek guidance or advice, but that it is expected prior to them accessing their pension savings. However, normalising seeking guidance is not something that can be achieved solely by nudging customers to pension guidance at the point of taking benefits. It will take a concerted effort to bring it into the mainstream by being highlighted by trusted consumer champions and supported by ongoing marketing efforts.”
