Life companies have defended their efforts to ensure customers are in the right products, after the regulator flagged concerns they were dragging their heels to switch pre-2012 pension investment strategies.
More than two years since the pension freedoms were introduced, pension customers may still be saving in inappropriate and outdated lifestyling products from some providers who have yet to finish revising their legacy pension schemes.
Historically, many pension lifestyle investment strategies were designed to target an asset mix immediately before a customer’s nominated retirement date to broadly match the tax-free cash and annuity purchase most customers made.
Following the 2015 pension reforms, with fewer customers choosing to buy annuities, the Financial Conduct Authority carried out a study of 13 providers accounting for around nine million customers in lifestyle investment strategies, to investigate what action they had taken to update their lifestyling products to match the pension freedom reforms.
The regulator found for business likely written pre-2012, most providers were still reviewing, or have plans to review, this business over the course of 2017 - a timetable the watchdog said it was "concerned" by.
FTAdviser contacted all the major life offices to find out why progress on ensuring customers are in suitable products is taking so long.
A spokesman for Standard Life said it has reviewed all its lifestyling investment strategies and now has more than 650,000 customers in flexible lifestyle strategies.
"The majority of these customers have been in these solutions since 2015. We also have an ongoing change programme for those who are still in older profiles. We expect to have taken action for the majority of them by the end of this year.”
Scottish Widows stated it has reviewed pensions business pre-2012 and has “changed the glide path on our default funds for those members more than five years from retirement so they are no longer geared towards taking an annuity in retirement."
For members less than five years to retirement, Scottish Widows is "actively engaging" them to help determine whether they should change out of the lifestyle product.
But the provider admitted it still has "small pockets" of pensions pre-2001 which have lifestyling, which it is currently reviewing and plans to take in a similar direction as pre-2012 business.
Aviva changed its lifestyling strategies in 2015, in response to the pension reforms, for all new pension schemes and all auto-enrolment schemes, according to a spokesperson.
"We have made interim changes for the majority of our customers to give them an outcome more suitable for people not intending to purchase annuities and are in the process of writing to other customers (or their adviser) where an interim solution is not available to ask them to consider alternative fund strategies."
Defending the time it has taken for them to carry out this work, Aviva stated: "We believe it could damage people’s retirement prospects if we tried to anticipate what they needed without collecting sufficient evidence.