The People’s Pension is calling on regulators to delay the commercial pension dashboard until providers can show simple, directly comparable metrics on investment performance, charges and customers.
These comments are in response to the Financial Conduct Authority’s (FCA) discussion paper on adapting the regulatory framework for a changing pensions market.
The People’s Pension (TPP) says it wants a rethink on the Value-for-Money framework to ensure it is more consumer focused. It says there is a need for greater transparency across the industry to help people make better decisions on transfers, and it is calling on providers and regulators to work together on this.
TPP says it wants the regulator to compel all providers to display these three key metrics, and says the commercial dashboard should be postponed until this is in place. It added that it would also like to see mandatory scheme comparisons during transfers, which would put an obligation on the receiving pension scheme to flag important differences between pension schemes, which may impact the final retirement pot, when processing a transfer.
It also wants a ban on any financial incentives to transfer or consolidate pensions.
This response highlights expressed concerns from a number of providers in the workplace pension sector, that savers may be persuaded to switch to higher-charging retail products when commercial dashboards go live.
Research from The People’s Pension highlights the potential difficulties people have evaluating charges information, and the fact that many may be persuaded by financial incentives to switch.
Its research, conducted in partnership with the Behavioural Insights Team, found that incentives such as free cash offers can lead savers to transfer their pensions without fully considering the long-term consequences.
Additional research with Ignition House found that many struggle to assess the impact of pension charges, with some assuming that any fee under 1 per cent is the same, despite the potential for significant financial differences over time.
The People’s Pension research also showed the significant impact pension transfers can have on long-term retirement outcomes. Analysis shows that individuals could miss out on as much as 20 per cent of their pension savings due to misinformed transfer decisions, equating to a potential loss of £1.2bn across the UK in just one year.
The People’s Pension CEO Patrick Heath-Lay says: “For too long, savers have been left in the dark when making pension transfer decisions – that needs to change. We’ve been campaigning for a step change in transparency, and this consultation is a crucial moment to fix a system that isn’t working in saver’s best interests.
“Our five-point plan sets out practical reforms that would create a more transparent and consumer-focused pensions landscape, helping to secure better retirement outcomes for millions of UK workers. This would ensure people can make informed choices about their future. While the consultation is a step in the right direction, the industry must now work together to make it happen.”
The five changes the People’s Pension is calling for include:
- Clear, comparable pension information: A requirement for pensions providers to display simple, comparable, and easy-to-find information on investment performance, charges and customer service.
- A ban on pension transfer incentives.
- A more consumer-focused Value-for-Money framework
- Delaying to commercial pension dashboards until VFM metrics displayed across all pensions
- Mandatory scheme comparisons during transfers, including an obligation on the receiving pension scheme to flag important differences between pension schemes
