a stronger nudge – flexible access and Pension Wise (85)
by Roderick Ramage, solicitor, www.law-office.co.uk
first published by distribution to professional contacts on 27 July 2022
This article is not advice to any person and may not be taken as a definitive statement of the law in general or in any particular case. The author does not accept any responsibility for anything that any person does or does not do as a result of reading it.
from 2014 to 2022 – flexible access and Pension Wise
The Taxation of Pensions Act 2014, s1 and sch 1, introduced, from 6 April 2015, pension flexibility for members of money purchase pension schemes on reaching the normal minimum pension age (55, but will be 57 from 6 April 2028). Members were given and still have the following options:
- a lifetime annuity;
- flexi-access drawdown, under which there are no limits how much or how little a member could take each year; or
- a lump sum payment, under which the whole of the fund could be drawn down as an uncrystallised funds pension lump sum, without buying an annuity or putting the fund into draw down.
In preparation for this requirement, HM Treasury announced on 12 January 2015 the name, Pension Wise, and logo of the new pensions guidance service, which has its own website, and on 16 September 2015 announced that responsibility for Pension Wise would move to the Department for Work and Pensions by the end of the financial year.
2022 – a stronger nudge
The regulations which have been made are the Occupational and Personal Pension Schemes (Disclosure of Information) (Requirements to Refer Members to Guidance etc.) (Amendment) Regulations 2022, SI 2022/30 were brought into force on 1 June 2022, to amend the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, SI 2013/2734, including the substitution of the following for the definition in the 2013 regulations.
“pensions guidance” means information or guidance provided by any person in pursuance of the requirements mentioned in section 4 of the Financial Guidance and Claims Act 2018 (information etc. about flexible benefits under pension schemes);
The Financial Conduct Authority’s rules about the stronger nudge to pensions guidance are its handbook as Practice Statement PS21/21.
Under the 2013 Disclosure Regulations as amended, trustees must offer to book a Pension Wise appointment for the member before actioning the member’s application to start to receive or to transfer his or her benefits and must not action the requests. If the member accepts, the trustees must take reasonable steps to book an appointment. They must give the member details how to book an appointment if either the member does not accept the offer or the trustees are unable to book a suitable appointment. They may implement the member’s application only if they have received confirmation that the member has either received guidance or has given an opt-out notification.
Stronger nudge does not apply if the member is under age 50 or if the reason is not for the purpose of receiving flexible benefits, eg it is to consolidate benefits.
The FCA Handbook PS21/21 is much the same, but with the difference that the member may notify his or her opt-out when applying to start benefits or transfer, while an opt-out under the 2013 Disclosure Regulations must be made in a communication made solely for the purpose of opting out.
The agreed relationship between the FCA and TPR is set out in their joint regulatory strategy for pensions on TPR’s website under the heading “FCA and TPR joint strategy”. An approximate division of their regulatory functions is that (with little regard to the PSA 1993 s1 definitions) TPR is responsible for occupational (including GGPs(!) and public service schemes, and the FCA for contract pensions eg SIPP and personal pensions and functions such as financial advice and income products eg annuities.
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