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Editor’s Column: The DWP's Flying Circus


I’m a big fan of Monty Python and the famous ‘nudge, nudge’ sketch came to mind this week as the DWP announced plans to give a ‘stronger nudge’ to pension savers to seek guidance from Pension Wise before taking benefits.

To be honest there aren’t too many connections between Monty Python’s sketch and the DWP but there are some if you look hard enough.

For those interested in the connections read on. If you’re not interested then click on the link above to view the sketch as it may brighten your day (warning that some of the language is a little fruity).

Let’s look first at what the DWP is calling for when it comes to pension guidance. After some time wrestling with the issue it decided that what’s missing from the pension landscape is advice. It can’t call it this so it calls it guidance.

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The fact is that hundreds of thousands of people retire every year with little or no advice. They make all sorts of blunders as a result and are also falling prey to the growing clutches of the scammers. Something needs to be done, the DWP decided.

So the DWP’s big idea is that it will give DC pension members a ‘strong nudge’ to seek pensions guidance as they race to the pension saving finishing line.

Unfortunately, as you’ll see from the Monty Python sketch, or perhaps you remember it, a nudge is a very indistinct message. The two characters in the sketch are unclear about what’s being discussed. Is a nudge a tacit instruction, an encouragement, a request, ‘a get on with it’ message? We don’t know.

Some critics have called it a “fudge not a nudge.” There’s no certainty that pension savers will take the hint from a nudge and there’s a likelihood that those who need advice the most will be the most likely to ignore a nudge.

So why has the DWP stopped short of taking the logical step of ‘auto-enrolling’ pensions savers into at least one appointment with the widely respected Pension Wise?

It could be due to fear of overwhelming Pension Wise, it could be the danger of being sued over mandating pension guidance, it could be something else. Pension Wise could clearly require major new funding to cope with the demand. Perhaps a fear of making a clear, long-lasting pension decision that may back-fire.

A nudge will, to be fair, be better than nothing although it will not fix the problem. Virtually everyone nearing retirement would benefit from professional advice. A nudge will not deliver this.

A nudge is a sticking plaster to cover a huge gap in pensions advice. Without some element of compulsory advice or guidance pension savers will increasingly be left to the wolves and the government, or rather the taxpayers, will pick up much of the tab one way or another.

Auto-enrolment into pensions guidance is the way forward.

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Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience.  This topical comment on the Financial Planning news appears most weeks. Follow @FPT_Kevin 


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