On the go: A stronger guidance nudge may be needed to increase the number of savers using the Pension Wise service, but it may not be enough to drive a significant uptake or deliver the right kind of engagement, the Pensions and Lifetime Savings Association’s annual conference has heard.
Speaking in a discussion on defined contribution decumulation, Pete Searle, director of private pensions and arm’s length bodies at the Department for Work and Pensions, said that people who use the Money and Pensions Service’s guidance scheme do find that it “informs the choices that they make”, yet take-up of the service will remain low unless action is taken.
“I think a stronger nudge will help improve that,” he said.
Yet Searle noted how there is a growing need to strike a balance between offering guidance to savers and transitioning them into taking action.
“There is a real tension here between getting more people to take that advice and making sure that people are really engaging constructively and receptively to it, because I don’t think there’s a great deal of value in driving people to a guidance session where they don't really listen — it's not going to change anything. That's just a cost with no benefits,” he said.
Stephen Timms MP, chair of the Work and Pensions Committee, added that the pensions industry should be engaging with people “a little bit earlier” on the back of the success of auto-enrolment, particularly in discussions on taking a tax-free lump sum.
He said: “Most people, when they come to that conversation with the provider, know what they want to do and probably it is heavily influenced by the tax-free cash. It’s a real struggle to get them to engage in a conversation about potentially doing something different because they’ve already decided.
“It just feels like a barrier for them, so I’m keen to explore whether there are ways of just getting to that conversation a little bit earlier,” he added.
Timms also said that if auto enrolling people into the Pension Wise guidance scheme is not an option, then devising “some much stronger nudges” to encourage a significantly higher number of people to access the service may be considered.
Alyshia Harrington-Clark, head of DC, master trusts and lifetime savings at the PLSA, added that the pensions industry needs to “test the efficacy” of any outcomes from a stronger nudge, as well as the cost and benefit balance of directing people towards the Pension Wise service.
In July, Pensions Expert reported that the DWP’s proposal for a stronger nudge towards guidance was not up to standard, according to industry experts, who said that any kind of nudge should be made significantly before a decision to access a pension pot has been made.
