The stronger nudge to pension guidance has had a “disappointingly low” impact since its introduction two years ago, data from the Money and Pensions Service (Maps) analysed by Quilter has found.

The stronger nudge was intended to normalise people taking Pension Wise guidance as part of applying to take or transfer their defined contribution benefits, meaning that when choosing guidance, people must make an active choice not to seek it.

In the first year following the implementation of the stronger nudge, June 2022 to May 2023, a total of 124,316 guidance sessions were attended, representing a 14 per cent increase compared to the 109,054 sessions attended in the year prior to the stronger nudge being introduced.

However, the research found that despite an initial improvement, the impact of the stronger nudge to pensions guidance appears to have already started to “wane”.

In particular, Quilter found that there are still "relatively few people" taking advantage of the support on offer, despite the stronger nudge, and many who initially plan to use the nudge are backing out before their appointment.

Indeed, the research revealed that in the second year, the number of sessions decreased year-on-year to 117,862, 8 per cent higher than the attendance figure before the stronger nudge came into effect.

Despite this, there was a "considerable" uptick in the number of guidance appointments arranged compared to the year before the stronger nudge, rising by 24 per cent in the same period in both 2022/23 and 2023/24.

However, the proportion of no-shows and cancellations of appointments increased from 25 per cent before the strong nudge to 30.5 per cent in 2022/23, and is expected to increase again to around 34 per cent in 2023/24.

Quilter also pointed out that the Financial Conduct Authority’s retirement income market data showed that 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.

However, it noted that, while awaiting data for 2023/24 to provide a clearer picture, this increase in the number of people accessing their pension savings year-on-year has not been reflected through an increase in Pension Wise appointments.

Quilter suggested that a factor contributing to the number no-shows and cancellations could be the length of wait times for the appointment, noting that, since the introduction of the stronger nudge, there has often been more than a month’s wait for the appointments due to lack of resources.

Given the sessions are offered to those who have already decided they wish to access their money and are optional, Quilter said it is unsurprising that many would not wish to wait.

Indeed, Quilter head of retirement policy, Jon Greer, said that, while well-meaning, the timing of the stronger nudge to pensions guidance comes when many people will already have decided to access their pension savings and have an idea of the action they wish to take.

“They may therefore view guidance as a barrier to their plans," he continued. "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.”

This could be an area of reform for any incoming government, as Greer said that, 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.

He also said that while Quilter continues 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,” he said.

“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.”

---