Defined benefit (DB) pension schemes with a defined contribution (DC) additional voluntary contribution (AVC) facility will need to comply with the government’s ‘stronger nudge’ regulations that are coming into force from 1 June.

LCP noted that as the new rules apply at the benefit level rather than at scheme level, occupational schemes that are mainly DB but have DC AVCs will also be impacted.

The stronger nudge to pension guidance will require pension schemes to offer to book a Pension Wise appointment for the individual, unless they wish to opt out of receiving guidance, in line with rules from the Financial Conduct Authority (FCA).

The government initially published plans for the stronger nudge in 2020, after behavioural trials on behalf of the Money and Pensions Service (Maps) revealed that savers were more likely to seek guidance after receiving a ‘stronger nudge’ from their provider.

An LCP spokesperson commented: “Any scheme that provides DC benefits, whether occupational or contract-based, whether mainly DB or mainly DC, should be finalising the necessary adjustments to its administration processes in order that the stronger nudge can operate for requests received from 1 June 2022.”

Arc Pensions Law associate, Danyal Enver, added: “The ‘stronger nudge’ requirements are fast approaching coming into law, despite a few critical consultation responses.

“It is not just DC schemes that need to worry about this, but also hybrid schemes and those DB schemes with additional voluntary contributions, as the requirements will apply to those benefits and therefore to those schemes.

“While DC schemes will be able to adjust the process they follow when any member requests access to their flexible benefits, the challenge for hybrid schemes and DB schemes with a DC element will be in assessing each member request to check whether it applies to a DC element.

“Such schemes need to stay alert and make sure they don’t get caught out by this as the stronger nudge is benefit specific, not scheme specific.”

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