People’s Partnership has called for the FCA transfer reforms to apply to the whole DC market to speed up consolidation and drive better outcomes for savers.
The FCA is proposing a new framework designed to speed up pension transfers and ensure savers have more information before switching or consolidation retirement savings.
The regulator wants ceding firms to 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.
Rather than mandating a single transfer deadline, the FCA said it hoped such reforms will improve transparency, reduce friction at the initial stage and reduce the time taken to transfer pensions over time. Slow pension transfer times have been an ongoing issue across the industry, hampering consolidation efforts.
But People’s Partnership says while such reforms are a “step in the right direction” their effectiveness will be severely limited if they are not introduced for trust-based schemes at the same time.
It is calling for closer alignment between the FCA and TPR on this issue, saying that these proposals will need to work alongside reforms in the Pension Schemes Bill.
Without this alignment the master trust provider warns there is a risk of a regulatory divide, potentially leading to uneven protections for savers and unnecessary complexity for schemes.
People’s Partnership, which runs the People’s Pension auto-enrolment master trust, adds that further action should be taken to address practices such as the use of incentives, if they are to deliver consistent protections across the market.
Assessing the proposals themselves, People’s Partnership said they represent, in principle, a clear improvement on the current transfer process, which focuses on speed and convenience rather than quality of outcome.
It welcomed the FCA’s focus on clearer information and better decision-making, adding that implementing reforms now, even if they are refined over time, would be preferable to maintaining the status quo.
The comments come in People’s Pension’s response to the FCA’s consultation paper, CP25/39.
People’s Partnership CEO Patrick Heath-Lay says: “The FCA’s proposals around improving the pension transfer process are a significant step in the right direction but they will only work if they apply across the whole market and align to the wider pension bill reforms.
“We are calling on the DWP to act quickly and introduce regulations at the same time as those that the FCA is proposing for contract-based pension schemes.
“We need to ‘walk in the shoes of savers’ who have little, if any, understanding of retail vs workplace pensions or indeed contract vs trust-based schemes.
“These reforms need to be centred on savers and as such regulatory parity must be central to the changes. Fragmenting the rules would add unnecessary complexity, increase administration costs, make the system harder to navigate for schemes and expose savers to unnecessary risk.
“A single, aligned approach is within reach. Regulatory consistency would support a simple, whole-of-market solution that protects all savers, supports the wider value for money agenda and avoids adding avoidable burden to the system. We believe the proposals could be strengthened further by including an outright ban on incentives, which have no place in pension transfer decisions.”