The Financial Conduct Authority (FCA) has criticised pension firms for the “poor value” offered on some legacy products, and urged them to do more for savers in these plans.
The FCA said complex charging structures, older product design and weaknesses in firms’ data meant some pension savers are not getting as much value as they could.
These findings came out of a multi-firm review, following the introduction of Consumer Duty regulations.
The FCA acknowledged that it had identified some good practices – and urged all providers to follow these examples.
It said some unit-linked non-workplace pension providers are working to simplify and rationalise legacy products and funds, while also capping or reduced charges for customers in these older plans. It also pointed to firms that are comparing outcomes across different customer groups and products, and actively moving customers to better-value alternatives.
The FCA is now calling on all pension providers across the sector to consider this report and take on the good practice identified. The regulator is also engaging with firms on barriers they face in improving the value for customers, particularly in closed books.
While this review specifically cites non-workplace providers, there are clear implications for the workplace pensions market, particularly with regulatory changes forthcoming to enable providers in the GPP market to make bulk transfers from legacy contracts without individual member consents
FCA director of cross-cutting policy and strategy Charlotte Clark says: “Consumers in older products should not be left behind. Dome firms are already showing it doesn’t have to be this way. We want to see that progress reflected right across the market.”
The FCA says this work supports wider reforms, including targeted support and pensions dashboards, to help consumers get the most from their pensions.
It is also a priority under the FCA’s Pensions Regulatory Priorities and forms part of its broader work on modernising pensions and long-term savings.