The Financial Conduct Authority has proposed new measures including a ‘pensions dashboard’ and an alternative to the existing wake-up pack to help reinvigorate the retirement income market.
The regulator’s retirement income report, published this morning (11 December), proposed various remedies, recommendations and actions.
These included the longer term development of a ‘pensions dashboard’ which would enable consumers to view all their lifetime pension savings - including their state pension - in one place.
“We are aware that this idea has been raised in the past and we recognise the challenges in implementation and cost for such a project. However it has been successful in other countries, and we believe that the case for introducing it in the UK is getting stronger,” read the report.
It would be accessed by UK consumers at any time through a personal log-in, it would set out an individual’s entitlements including all of their accumulated DC pension savings, and could be developed over time to allow consumers to view all of their other sources of retirement including state pension entitlements in one place.
The FCA also stated that it will work with government to develop an alternative to the current wake-up pack, which should be behaviourally trialled to assess the impact on consumers’ awareness of their right to shop around, and the proportion of people who switch.
The report noted that research showed that consumers find wake-up packs too long, difficult to navigate and full of jargon.
“We consider that changes are needed to the existing at-retirement communications in order to ensure clarity and simplicity for consumers, allowing them to exercise choice effectively.”
As previously mentioned in the FCA’s policy statement about retirement reforms and the ‘guidance guarantee’ last month, a thorough review will be undertaken in 2015.
“We also propose to consult on replacing the Association of British Insurers’ Code of Conduct with our own rules. This work will build on the standardisation work being undertaken with the Treasury and industry.”
The FCA stated that the potential benefits of replacing the ABI Code with its own regulation would be to ensure that those aspects of the code incorporated within its rules are fit for purpose in the new landscape, and that consumers receive information which informs them of their right to shop around and exercise their open market option.
The regulator also mentioned that it considers the issues and risks of uncrystallised funds pension lump sums to be broadly similar to those with income drawdown products.
“Therefore, our intended approach will be to treat these different retirement income options consistently in our regulation of income drawdown products, and to require at-retirement information to be provided to everyone before they take benefits from their pension savings.”
The FCA will also be working with the Department for Work and Pensions and The Pensions Regulator on the regulation of income drawdown and UFPLS as these may also become a feature of the occupational pensions landscape, it added.
peter.walker@ft.com
