The Financial Conduct Authority (FCA) has launched a review of the rules governing defined contribution (DC) pensions, with a focus on pension projections, DC pension transfers and consolidation, and Self-Invested Personal Pensions (SIPPs).
The review, accompanied by a discussion paper, outlines recommendations to enhance support for retirees and savers, particularly those who are disengaged or unable to make active decisions about their pensions.
The FCA is seeking feedback on how to improve accessibility to guidance and resources, and exploring changes to the regulatory framework for pension projections, digital tools, and consolidation. The goal is to ensure that “transfers and consolidation are efficient and in the consumer’s interests”, especially with the introduction of pensions dashboards.
The FCA emphasises that the purpose of the review is to “stimulate discussion” and gather insights to inform future reforms, aiming to ensure pensions provide good value for consumers and meet diverse needs within the market.
A Bell says this is a major step in the continuous endeavour to guarantee that UK pension schemes continue to be open, transparent, and efficient for everyone.
AJ Bell director of public policy Tom Selby says: “The FCA has set its stall out today when it comes to pensions, with a clear-eyed focus on ensuring savers and retirees get better support when making often complex financial decisions. In addition, the regulator wants to kick the tyres of existing pension rules to ensure they aren’t undermining this engagement drive.
“The regulator deserves credit for taking an open, pragmatic approach that focuses squarely on delivering good outcomes for consumers. Current rules governing projections – essentially a guess at what your pension might be worth decades in the future based on a number of variables – are ripe for review.
“If it is the case that adopting three different projection values results in disengagement then the case for change is clear. Ultimately none of these numbers are going to be bang on the money – they are simply designed to help give a rough idea of where you might end up. The goal of any changes to projections rules must therefore be simplification to ensure they don’t act as a barrier to engagement.
“Ensuring pension transfers work as efficiently as possible is also of crucial importance. A sensible balance needs to be struck here between protecting savers from criminals attempting to steal their hard-earned retirement pot and slowing down perfectly legitimate transfers to reputable firms.
“This will likely require engagement with DWP, which sets the terms for so-called ‘amber’ and ‘red’ transfer flags designed to protect people from scams. It is also vital that savers consolidating their pensions with a provider consider the overall value of the firm they are transferring to, taking into account things like costs and charges, investment choice, service and retirement income options.
“SIPPs have evolved to become an integral part of the modern, mainstream pensions market. Given the significant growth we have seen in the UK SIPP market, particularly since pensions were made more flexible in 2015, it makes sense for the FCA to review its approach to make sure it remains fit for purpose. This will need to balance ensuring consumers continue to be adequately protected without unnecessarily burdening firms who already have good consumer outcomes baked into the way they operate.”
