Pension providers are calling for the introduction of ‘personalised guidance’ and demanding a level-playing field between trust- and contract-based in response to the the government’s latest consultation on helping savers understand their pension choices.
The Department of Work and Pension’s ‘call for evidence’ has let to a number of providers publishing their response. Aegon says the government should build on the work done by the FCA to ensure consistent pre-retirement communications regardless of whether members save in a trust-based or contract scheme. It also wants to for the regulatory regime to allow more tailored communications and include personalised guidance, to help those saving in both GPP and master trust arrangements.
Aegon says aligning the regulatory regimes would mean trustees have to issues regular ‘wake up packs’ to members explaining their retirement options from the age of 50, and may also have to offer set investment pathways, if members opt for drawdown without advice.
Phoenix Group says is also calling for greater alignment between these two structures. It points out that many people will have several jobs throughout their working lives, so it is likely they will hold a mix of both types of schemes.
As a result it says it is broadly supportive of the expansion of the FCA’s Retirement Outcome Review to include trust-based arrangements. It too would like to see changes to ensure providers can give more tailored guidance to ensure people are making the most of their retirement options.
Phoenix Group said there is a need for regulations to be consistent between the two regimes. But is says it would “encourage” the DWP to await the findings for the FCA’s current review into investment pathways before deciding on any new requirements to be placed on trustees. It says this will ensure decision-making is based on the most recent analysis and allows the FCA and DWP to work collaboratively to draft consistent rules.
Aegon head of pensions Kate Smith says: “It’s of little interest to individuals whether they are saving in a contract-based group personal pension, a trust-based master trust or a single employer scheme.
“In an auto-enrolment world with millions saving ‘by default’, it makes no sense to have different regulatory requirements around communications, including in the run-up to retirement.
“The FCA has led the way in helping savers understand their pension freedom choices; wake-up packs are issued every five years from age 50 and newly-introduced investment pathways will hopefully help non-advised drawdown customers with investment choices. Trust-based regulations have been stuck in a time warp, with wake-up packs required only a matter of months before savers’ retirement date, far too late to aid engagement and planning.”
Aegon says the DWP should take a lead from the FCA rather than trying to “re-invest the wheel”.
Smith adds: “There’s potential for further improvements across the whole pensions world, using digital communications with improved personalisation rather than piles of unread paper. We hope Treasury and FCA will in future allow regulated firms to offer more personalised guidance, tailored to the individual. Together, and alongside pension dashboards, these could create a step change in pensions engagement and improved decision making, fit for the 21st Century.”
Andy Curran, chief executive savings & retirement at Phoenix Group and CEO of Standard Life, adds: “Pension Freedoms challenged our industry to provide innovative solutions to meet the needs of our customers. Now we must work to deliver on the call Phoenix Group made earlier this year to help customers understand, and make effective use of, the options available.
“Providing generic information is not enough; we believe that real innovations in personalised guidance and financial advice are needed to close the guidance gap and help members to make informed decisions.
“Currently it is difficult for pension schemes to do that as there is a significant risk that steps taken to support customers in this way could be seen as providing financial advice. We would welcome policy changes that allow more flexibility for pension providers to help support customers to make choices for their retirement and we have been calling for a government-led review to look at how best to support consumers to manage their finances.”