Industry experts have welcomed the intention behind new stronger nudge requirements, although concerns have been raised that the plans have been “poorly timed and mismanaged”.

New requirements for trustees to offer to book their members a Pension Wise appointment when they apply to access their flexible benefits, unless they wish to opt out of receiving guidance, came into force today (June 1).

The move has been welcomed by industry figures, with Buck head of DC and wealth, Mark Pemberthy, arguing that “any opportunity to increase engagement with education or guidance is definitely worth exploring”, as savers are often left facing "complex and potentially irrevocable" financial decisions.

“The introduction of Pension Wise was an important element of pension freedoms to reduce the risk of members making expensive mistakes, but the number of people making use of the service so far has actually been very low,” he continued.

“Hopefully this wider rollout of stronger nudge will have at least the same impact as the pilot”.

However, Barnett Waddingham self-invested pensions technical specialist, James Jones-Tinsley, warned that whilst at face value, any move to increase people’s engagement with their pension is “a positive thing”, there could still be issues with the proposals in practice.

“The government’s move to push people aged 55 and over to take a Pension Wise appointment before drawing down their pension was a sensible first step; however, it is poorly timed and mismanaged,” he explained.

“To date, only one in 33 of those eligible have taken the appointment. If the timing of the nudge was moved earlier, before people have already made a decision and need their money to be readily available, the value of the appointment would increase exponentially."

Jones-Tinsley also suggested that the government could learn a lesson from the success of the Covid vaccine booking system and replicate it for those in their 50s to create a smooth, streamlined appointment process.

“At a time when the cost-of-living crisis is hitting pensioners hard, making the right decisions with your money is vital," he said.

"The Financial Conduct Authority (FCA) and Department for Work and Pensions (DWP) have a duty to meet people where they are, creating the best possible environment for pensioners to have a healthy and happy retirement.”

These concerns were echoed by Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, who warned that whilst the stronger nudge has the potential to “really boost” awareness of retirement options and of Pension Wise, timing will be crucial.

“How and when this nudge is delivered is all important in helping people get good outcomes,” she explained, continuing: “The FCA has opted to go with delivering the nudge when the customer applies to take a retirement income.

"The rules don’t preclude delivering the nudge earlier but by setting the minimum at point of access there’s a chance that this is what many providers will opt for.

“Waiting until a point where someone may already have decided how they want to take their retirement income was never going to be as successful as contacting someone who is still exploring their options."

In addition to this, Morrissey warned that customers may still struggle to make decisions around products and providers, suggesting that the ability to provide a more personalised guidance service could "really help" these savers make more confident and informed decisions around their retirement.

Standard Life customer savings and investments managing director, Jenny Holt, echoed this sentiment, arguing that more work needs to be done to help the majority of savers to make better informed decisions, “particularly when you bear in mind that many savers are using a range of assets in addition to their pension pots to fund their retirements”.

“We would like to see further action taken to help put more tailored guidance in place and to enable our industry to play a greater role in closing the guidance gap,” she said.

Adding to this, Legal & General Retirement Solutions managing director, Emma Byron, said: “While we are confident this help will have a significant impact on the financial wellbeing of many people, it will be important that we keep a close eye on how it changes their behaviour so we can learn further lessons.

“It will be prudent to next consider how we support those people who are still accumulating using personalised guidance, to help them to take the necessary action to ensure their retirement aspirations will be met.

"If savers are not fully aware of the level of pension investment needed, then the Pension Wise appointment may be a rude awakening that leaves them little time to act upon.”

Commenting in response to the concerns, a DWP spokesperson said: “We want guidance to be available to savers when making decisions about accessing their pension pots and our stronger nudge measures will help achieve this, striking the right balance between providing vital protections and informing pension savers, while also giving them freedom and choice about how to use their hard-earned pension savings.

“To ensure savers have the support and information they need to make informed choices about their financial futures, we’re also working alongside industry and investing in simpler statements and pensions dashboards, which will make it easier for people to access and make sense of their pensions information to support retirement planning.”

Pensions Age has contacted the FCA for comment.

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