Pension providers will now have to offer you a free appointment to help you make informed decisions about your future when you come to retire, due to new rules that came into force this month.
The ‘stronger nudge’ rule means that if you’re over 50 and decide to access pension savings held in a UK-based workplace or private pension, you’ll be offered an appointment to talk through your options.
This appointment will be with Pension Wise, which offers a free and impartial government service.
Here, Which? explains what the rule change means for you, and what to expect at your Pension Wise appointment.
What is a 'pensions nudge'?
Under changes brought in on 1 June by the Financial Conduct Authority (FCA), your pension provider will have to give you a ‘stronger nudge’ that encourages you to access further guidance on your options when you decide to access your pension savings.
Providers will be required to:
- refer you to Pension Wise guidance
- explain the nature and purpose of Pension Wise guidance
- offer to book a Pension Wise appointment for you, or give you information on how to book your own appointment.
The new rules followed a government consultation and trials which found that the take-up for Pension Wise appointments significantly increased when people were ‘nudged’.
At present, just 14% of defined contribution pension pots are accessed after the use of Pension Wise.
Pensions minister Guy Opperman said this would help people make informed decisions about accessing their savings, and help protect consumers by encouraging the use of free, impartial guidance.
- Find out more: Pension Wise explained
Who will receive the nudge?
You’ll be given a nudge if you’re over 50 and have a defined contribution (personal or workplace) pension.
The rules will also apply to providers of personal and stakeholder pension schemes, including operators of self-invested personal pensions (SIPP).
The service isn’t available to those accessing or transferring out of a ‘defined benefit’ pension, which are typically based on your final salary and years or service, rather than your own contributions.
- Find out more: what can I do with my pension pot?
What is Pension Wise?
Pension Wise is part of the Money Helper service and offers guidance about your defined contribution pension options.
It was introduced in 2015 after the government introduced greater choice in how you can access your pension savings, and is committed to helping people understand their pension options.
A Pension Wise appointment will typically last around 45 to 60 minutes, and will cover the following:
- your pension and payment options
- how each option is taxed
- give you next steps to take what you should check before making any decisions
- how to look out for pension scams.
You should take along your personal pension statements, a state pension statement and a summary of your bills and regular spending. Our guide can help you come up with useful questions to ask at your Pension Wise appointment.
Pension Wise will not recommend any companies, or tell you how to use your pension pot or invest your money.
Can you opt out?
You can choose to opt out of the service, particularly if you have already received financial advice on your pension options.
To do this, simply tell your pension provider that you don’t want a guidance session.
Alternatively, you may want to book your own Pension Wise guidance session, in which case you should also let your pension provider know.
- Find out more: six pension must-dos for 2022
How to book your own Pension Wise appointment
You can call or book online to get an appointment, which can either be face to face, or over the phone.
Even if you've used the Pension Wise service before, you can get a free appointment again if your circumstances have changed since the last appointment.
For more information, visit moneyhelper.org.uk, or call 0800 138 3944 to book an appointment.
Savers urged to book appointment sooner
Although pension firms have been positive about the changes, some suggest savers should be encouraged consider their retirement options earlier.
Investment firm Hargreaves Lansdown said that when it took part in trials with the Money and Pension Service, it found the earlier the nudge came in the process, the more likely the person was to take up the Pension Wise appointment.
Helen Morrissey, senior pensions and retirement analyst at the firm added: ‘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.’
- Find out more: how much do I need to retire?
source https://www.which.co.uk/news/article/stronger-nudge-pensions-guidance-comes-into-force-what-does-it-mean-for-you-aGqk55i3acJt