FCA proposals to improve pension transfers have been slammed as “anti consumer” and “anti competitive” by a leading Sipp provider.
AJ Bell CEO Michael Summersgill said the planned reforms risk delaying pension transfers and are “completely unworkable” in their current form, describing them as “the worst kind of regulatory intervention”.
The FCA is proposing a new framework, designed to speed up pension transfers and ensure savers have more information before switching or consolidating retirement savings.
The regulator has proposed that ceding firms acknowledge transfer requests within two days, and then supply key details to the new provider within a 10-day timeframe. The new provider then has three days to present comparisons back to savers, who will then decide whether the transfer should go head.
Summersgill says these reforms risk slowing down the transfer process and will create additional friction, putting barriers in the way of greater consolidation across the market.
He adds that as these proposed reforms will only apply to FCA-regulated pension firms this will create further complexities in the sector. He adds that many of the worst offenders, when it comes to slow transfer times, come from TPR-regulated firms.
AJ Bell is not the only provider to criticise these FCA proposals, although his comments go further than others.
In their response to the consultation on this issue People’s Partnership called for the reforms to apply to all FCA- and TPR-regulated firms. Pensions UK, meanwhile, added that the proposals, as they stand risked creating “disjoined and confusing customer experiences”.
Summersgill says: “Without presenting any clear justification, the FCA has set out plans to shut down consumer choice and put barriers in the way of people who do the right thing and engage with their retirement finances.
“This is all the more baffling given the regulator has spent years rightly focused on improving pension transfer times – including identifying slow transfers as a key harm it wanted to address as recently as 2023.”
He adds: “This is a classic case of a solution looking for a problem that simply does not exist. There are vanishingly few policies that contain guaranteed benefits that could be lost during a transfer and pension finding services often used by people consolidating retirement pots usually flag these to customers anyway.
Those in the workplace pension sector have often argued that too many savers are consolidation low-cost schemes into higher-charging Sipps, based on more effective marketing. But Summersgill says the costs of modern Sipps were competitive.
He pointed out that these typically sit “comfortably” below the 0.75 per cent AE charge cap, although most multi-employer schemes have charges far below this cap. Summersgill also claimed that Sipp platforms offer better investment choice service and flexibility than workplace pension schemes.
He adds: “The contrast between this ill-thought-out intervention and the measured, collaborative, evidence-based approach taken by the regulator to Targeted Support reforms is glaring.
“The FCA needs to go back to the drawing board here and engage with firms on solutions that do not risk causing substantial consumer harm through delayed transfers.
“Annual benefit statements are the natural solution, with the anticipated launch of the Pensions Dashboard providing an obvious platform to allow people to compare information on their different pensions.”
