The Financial Conduct Authority (FCA) has launched a consultation on proposals which would require providers to ‘nudge’ members towards receiving guidance from Pension Wise before accessing defined contribution (DC) savings.

The consultation, which is open to responses from the industry until 29 June, outlines plans that would see providers refer members to Pension Wise, explain the nature and purpose of the service’s advice, and offer to book appointments on behalf of the member.

Providers would also be required to confirm and record whether members opted out of receiving Pension Wise guidance, received the guidance or received regulated advice.

The FCA also called for ideas about how to further increase take-up of Pension Wise’s services.

Currently, pension providers are simply required to signpost consumers to the service’s guidance and encourage them to seek appropriate pension guidance or advice to help them understand their options.

The consultation follows parliament’s decision to encourage consumers to take advantage of Pension Wise guidance through a stronger 'nudge', although it has stopped short of pushing for use of the free service to be mandatory.

FCA executive director, consumers and competition, Sheldon Mills, said: “Pension Wise is a great service which helps people to understand their options when accessing their pension savings. We know that when people use Pension Wise they are happy with the service and find it helpful. However, few people are choosing to attend a guidance appointment.

“Our proposals will help to ensure that consumers get more information about the service, are further encouraged to use it and can have an appointment booked for them there and then.”

Data released by the Money and Pension Service in January following a freedom of information request by Just Group showed that take up of Pension Wise guidance sessions was just 1.2 per cent in some areas of the UK in 2019-20, with savers in Northern Ireland, London and the North East of England being the least likely to use the service.

Commenting on the consultation, AJ Bell senior analyst, Tom Selby, commented: “The policy aim of getting more people to take guidance and advice about their pension is one we are 100 per cent behind.

“For millions of people the decisions they take about their hard-earned retirement pot will have significant ramifications for decades to come, impacting not just themselves but their families too.

“These decisions can be complex and therefore need to be carefully thought through, based on a solid understanding of the implications they could have over the long-term. Guidance has a key role to play in this process.

“The stronger nudge proposal outlined by the FCA today focuses explicitly on the point at which savers indicate they want to access their pension, with an extra onus on providers to offer to book appointments on behalf of customers.

“It will be crucial in designing this process for booking appointments that there are not any unintended consequences, such as savers facing delays that they’re unwilling to accept in receiving benefits.

“More broadly, the focus of both government and the FCA would be better placed encouraging guidance well before someone says they want to access their pension. In reality many people have already made up their mind about what they want to do at this point in time, and so will be less susceptible to such nudges.”

Just Group group communications director, Stephen Lowe, warned that evidence showed the 'stronger nudge' would "only deliver a marginal change" in Pension Wise usage.

"This is a plan set up to fail, which is acknowledged by the fact this consultation is appealing for more ideas to increase guidance usage, particularly earlier in the retirement journey when people are still making up their minds," he continued.

“The government has set an ambitious objective for the regulator but has also effectively tied its hands by refusing to let it consider genuinely transformational measures such as automatic enrolment into pension guidance sessions from age 50.”

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