The Pensions Regulator (TPR) has recently updated its guidance for trustees of defined contribution (DC) occupational pension schemes who will be in scope of incoming Department for Work and Pensions (DWP) stronger nudge regulations.
Background
By way of background, on 1 December 2021 the Financial Conduct Authority (FCA) published rules that will require pension providers to implement a ”stronger nudge” to Pension Wise appointments from 1 June 2022 onwards[1]. The FCA rules will mean that providers of contract-based DC schemes (personal and stakeholder pensions) must ensure that members have taken or opted out of Pension Wise guidance before they flexibly access or transfer out their DC benefits.
DWP has, following a consultation period which ended on 3 September 2021 and a response issued on 17 January 2022, confirmed new regulations requiring DC occupational pension schemes to give members a “stronger nudge” towards Pension Wise guidance. Based on the incoming regulations, from 1 June 2022 scheme trustees will need to ensure that members have taken or opted out of Pension Wise guidance before they flexibly access or transfer out their DC benefits[2].
The regulations will apply where a member over 50 applies to start receiving money purchase benefits or to transfer such benefits to another scheme (although some exceptions apply if the transfer is only being made for the purpose of consolidating pension pots).
TPR guidance[3]
TPR has updated its guidance for DC occupational pension schemes to reflect the new “stronger nudge” guidance requirements.
The updated TPR guidance sets out how those requirements fit into schemes’ retirement communications and gives some suggestions on what TPR expects the relevant communications to contain.
It also reminds schemes that they may need to update their processes in order to be in compliance and makes a recommendation that an offer to book a Pension Wise appointment should be made as early as possible.
The updated TPR guidance also confirms that the requirements will not apply to applications processed prior to 1 June 2022 and that the way trustees include the requirements in their member retirement journeys is up to them to decide, so they retain some flexibility in how they engage with members.
Trustees of DC schemes should be mindful of the incoming DWP regulations and the changes that they will have to make to their processes as a result.
[2] Link to gov.uk here – the consultation ended on 3 September 2021. The government response was made on 17 January 2022 (see here) and the DWP regulations will go ahead on 1 June 2022.
[3] Link to TPR guidance here – they have made the updates by updating the ”Communicating and reporting: DC schemes” guidance.
