- The FCA has launched a major review of defined contribution (DC) pension rules (FCA: DP24/3)
- Discussion paper comes alongside landmark proposals to boost the help available to savers and retirees
- The regulatory framework for pension projections, DC pension transfers and consolidation, and Self-invested personal pensions (SIPPs) will all come under the microscope as part of the review
- The FCA says the paper is designed to “stimulate discussion” and help ensure people using pensions can access the help and support they need
Tom Selby, director of public policy at AJ Bell, comments:
“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.”
