In our last e-bulletin we looked at the final rules published by the FCA and DWP for implementing the "stronger nudge" to pensions guidance.
Following questions in response to our e-bulletin, we've looked in more detail at two key issues:
- Do the stronger nudge rules apply to SSASs at all? and
- Do the stronger nudge rules apply not just to members, but also to persons in receipt of survivor benefits following the member's death?
The stronger nudge rules will require pension scheme providers/trustees to offer to book an appointment with the Pension Wise guidance service for members in certain circumstances (-broadly, where it appears likely that the member will start to receive benefits soon). Where the stronger nudge requirements apply, the trustees/provider must not generally action a benefit/transfer value request without obtaining confirmation from the member either that guidance has been received or that the member has opted out of receiving guidance. The FCA rules will apply to providers of personal pension schemes and the regulations produced by the DWP will apply to trustees of occupational schemes. The new rules take effect from 1 June 2022.
Do the stronger nudge rules apply to SSASs?
Following a query, we've looked again at this issue and have now concluded that SSASs (assuming all the members are trustees) will be exempt.
The stronger nudge requirements for occupational pension schemes have been introduced by adding new regulations to the Disclosure Regulations (full title the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013). The stronger nudge regulations are subject to an existing exemption from the obligation to "give information" to a member of an occupational pension scheme where all the members are themselves trustees. Initially we considered that the obligation to offer to book a pensions guidance appointment (and take reasonable steps to make the booking if the offer is accepted) was not an obligation to "give information" and therefore fell outside the exemption. However, we now consider that the exemption must be intended to provide an exemption from all of the "stronger nudge" provisions. We've come to that conclusion because an exemption that only applies to some elements of the stronger nudge requirements, but not all would produce some absurd consequences. (For example, SSAS trustees would be obliged to offer to book an appointment, but not to explain the consequences of a failure to opt out of guidance.)
Can the stronger nudge rules apply to someone receiving benefits following the member's death?
For occupational pension schemes to which the stronger nudge requirements do apply, we think it's clearly intended that the legislation can apply to a beneficiary who is a survivor of a member, as the provisions apply to a "relevant beneficiary" which is defined to include not only a scheme member but also someone with a benefit entitlement following the member's death.
For personal pension schemes the position is a bit less obvious, but we consider the stronger nudge rules can apply to a survivor. The FCA stronger nudge rules apply in respect of a "retail client". The FCA's Conduct of business sourcebook (COBS) says that in relation to a firm operating a personal pension scheme, a member or beneficiary of the scheme is a client of the firm. COBS also says that in respect of an election to make income withdrawals, a reference to a retail client includes, after that person's death, his surviving spouse/civil partner/dependant.
Our thoughts on application of the stronger nudge rules to survivors
The FCA's Policy Statement introducing the stronger nudge rules didn't discuss their application to survivors of the member so it's not clear how much consideration the FCA has given to this issue. The nudge is triggered by a "decision in principle" by the individual concerned. This means that the potential for it to be triggered in respect of a member's survivor could in part depend on the extent to which the scheme rules/practice leave decisions up to the survivor. The nudge provisions have been incorporated into the retirement risk warning rules and we understand that a number of SIPP providers currently have no plans to "nudge" in relation to death benefits. Another issue is that the Pension Wise website says that individuals must be aged over 50 to book an appointment. However, it appears that there could be some circumstances in which the stronger nudge provisions could potentially be triggered in respect of a survivor aged under 50.