The “personalised nudge” – down the slippery slope or a shove towards better pensions?

This week we are hearing a lot about what providers think they should be able to do with their customers to help those customers take better decisions. A pension provider’s view of what’s good for a customer may be skewed by self-interest but most customers have a little bell in their ears that rings out “they would say that – wouldn’t they” at the same time as “but they may be right” and we’ve all learned to live with selective information!

There are a number of drivers for this frenzy for engagement, the primary driver being the FCA’s new Consumer Duty. A provider’s Consumer Duty is to know and assist their customers, to the FCA that means treating customer’s fairly, to everyone else that means upselling.

Let’s look at a few examples; first up – Chris Hill, CEO of Hargreaves Lansdown who’s pushing the FCA to relax the advice rules and asking it not to label personalised ‘nudges’ as regulated advice. A “personalised nudge” is only one of a litany of clichés that trip off Hill’s lips in this clip.

Although there are examples in Hill’s pitch, I’m still not clear why a nudge becomes personalised because it isn’t delivered as a generality.  To me guidance is information that’s relevant to someone taking a decision, selective it may be but it stops short of advice because it doesn’t deliver a definitive course of action. A nudge is not the same as a shove.

What Hill is saying about the Consumer Duty is interesting and I think right. If you are to act within the spirit of the FCA’s Duty, then you want to be effective in getting the right outcomes and that means knowing what good outcomes look like and what drives them.  So selective guidance is based on strong conviction that the consumer comes first.

Smart firms with strong propositions won’t need to overtly upsell, they just need to be in the right place at the right time. The Consumer Duty opens the door to managers of non-advised SIPPs to engage with their customers as never before, expect them to continue to push at a half-open door with every stronger personalised nudging.

Meanwhile insurers are falling over themselves to demand a “level playing field” so that they can also offer guidance to members of occupational schemes and contract based workplace pensions – as the DWP closes its call for evidence on how we can help savers understand their retirement options.

For Aegon that means requiring FCA style wake up packs to be sent to members of occupational pension schemes and the introduction of investment pathways for everyone in a workplace pension. The level playing field would  be a very profitable one for organisations winning the battle for pension spending.

Andy Curran, CEO of the Phoenix life companies calls for more circumspection and for the DWP to hold on till the FCA comes up with its next iteration of investment pathways, like Hill he is calling for personalised guidance, though I suspect he too is struggling to know how far he can provide selective personalised information before the nudge is deemed advice.

Case in point – AVCs and Pension Wise,

And then there’s Pension Wise, which has been in the news as the DWP is suggesting that members of DC schemes with AVCs might need some help working out what to do with their AVC pot.

What we have to bear in mind is that Pension Wise is not working on personalised information but is offering general guidance. General guidance is all very well when the consumer’s starting point is low, but members of DB schemes to choose to pay extra contributions are (by definition) engaged savers – they are not auto-enrolled into AVCs.

AVCs interact with scheme benefits in complex ways, in public sector schemes they are often used to fund the tax-free cash – meaning members don’t have to swap valuable indexed pension to pay themselves a lump sum on retirement. AVC products are often set up with a host of legacy features which need to be safeguarded including with-profits guarantees, guaranteed annuity rates, non-underwritten life insurance and subsidised charges.

It amazes me that Trustees pay so little heed to their AVC plans which have become a pixies garden of delight for the discerning member and completely bamboozling to many pension support staff. These product features and weird interactions with scheme benefits trigger secondary consequences such as tax liabilities on annual and money purchase annual and lifetime allowance!

Which is why I call a trip to Pension Wise to discuss money purchase AVCs – an embarrassment in  waiting. Pension Wise’s generic approach is simply not suited to those more aware of pensions and while not all payers of AVCs are sophisticated, they are  self-selecting as more engaged.

Personalised guidance has been described as at the top of a slippery slope that ends in unregulated advice. That is right, if the guidance is not properly supported. Which is why guidance needs regulatory oversight like advice.

Personalised guidance can help savers make informed decisions but only if it data driven and supported by experts who are familiar with the issues of those needing guidance. It requires as much skill to provide relevant support to someone who knows nothing about pensions as to people who are asking complex questions. Personalised guidance needs more than a tweet or a tic-toc video, it needs a dedication to helping consumers make the right choices (according to your or your organisation’s convictions).

Infact, letting people make their minds up for themselves is the most effective way of selling, for it encourages informed choices and minimalizes herd behavior. But insurers , trustees and regulators should not think that guidance is free (any more than advice is), it comes at a cost – peace of mind usually does.

Should the personalised nudge be encouraged or given a red flag?


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to The “personalised nudge” – down the slippery slope or a shove towards better pensions?

  1. Eugen N says:

    How many iterations is this one: we had “basic advice and “CAT products”, we were suppose to have simplifies advice, in the end, it remains either non-advice or full advice.

  2. Richard T says:

    “Hill reveals he wants to use the vast amount of digital data HL has on its 1.6 million clients to give them personalised nudges, specific to their particular needs, without that counting as regulated advice.” Another way of putting that, I think, is to say he would like to be able to give advice without bearing any liability. (What if the personalised “nudge” specific to particular needs turned out to be a bad “nudge”? Who bears the responsibility there?)

    Eugen N mentions iterations – yes, we had stakeholder products, which were going to be so simple and straightforward as not to need advice. Then we had Basic Advice, which was the advice needed to sell stakeholder products. There were CAT standard products. Then there were the simple products that came out of the Carol Sergeant review – anyone remember them? Then we had FAMR.

    But the FSA and then the FCA have given literally hundreds of pages of guidance on where the advice boundary is, how to provide guidance that is not regulated advice and how to provide cheaper, more targeted, ‘simplified advice’. For instance

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