Regulators in listening mode

But nor would you design so many variations of pension product. Whether we like it or not, we have abundant complexity from decades of policy changes, regulations and ultimately, product innovation.

But this history is not all bad.

The Financial Conduct Authority and The Pensions Regulator's joint strategy – entitled, Regulating the Pensions and Retirement Income Sector: Our Joint Regulatory Strategy – comes at a time when the state pension has already been simplified, almost 10m people have been auto-enrolled into a pension and the retirement market has been transformed to offer more flexibility for consumers.

And of course there are plenty of other initiatives already underway, such as the development of the pensions dashboard and the creation of a single financial guidance body.

You could argue that – aside perhaps from tax relief – the big ticket strategic questions for politicians on pensions have largely been answered. And we have relative consensus among parties.

There was clearly still some feedback from respondents that one regulator for pensions is enough, but it was in the minority.

I used to subscribe to this view, until I realised the value of having the specialism of TPR; something that could easily be lost if it were subsumed within a much larger organisation with a broader remit.

You only need to look at the rocket science involved in regulating defined benefit schemes to see this. It would be a bit like suggesting you combine the driving test for cars with those of HGVs, as if they were sufficiently similar.

You cannot fault the approach taken, with both regulators jointly consulting and running workshops around the country to gather feedback from key stakeholders. I attended the Edinburgh event and it was clear to me they were in listening mode.

There are two statements that stand out for me.

The first is the simple acknowledgement of the risk of: "people not having adequate income, or the level of income they expected, in retirement".

There is a subtle but significant distinction in this statement. In short, the second point is addressable if we can educate people sufficiently and achieve some level of engagement.

It is pleasing to see this general theme of engagement throughout the paper, and I am wholly supportive.

However, the first part of the statement is not necessarily solved by the second.

Key Points

• The Pensions Regulator and the FCA have published a joint strategy paper on retirement saving
• Education is a key aspect for getting people to engage with saving for the long term
• Consumers are starting to learn how to spot pension scams

In fact, it seems inevitable that for at least the many people already in the twilight of their careers, a lack of any pension saving to date cannot easily be rectified.

For this population, saving something now will definitely help, but many will not have what they will describe as an adequate income in retirement.

The strategies outlined in the paper are welcome, but we have to be realistic about the timescales over which they will make a notable difference to people’s retirement outcomes. The second statement that stands out is that the strategy seeks to “go beyond the traditional view of a pension pot as a passive receptacle for money”. While I do not believe anyone has ever described a pension that way in practice, the point is well made.

Cynics argue that engagement is a waste of time, and that perhaps even education is pointless. They suggest that automatic enrolment’s success is proof that only inertia and defaults work. I disagree entirely. I think we are doing people a disservice to suggest they will never be interested in their long-term savings, and the choices in retirement now command a level of decision-making, even where consumers have the benefit of advice.

Engagement

Engagement is a journey that starts with a nudge – the simple notion of doing the right thing – and builds from there. Although not explicit, it is easy to infer a recognition of this engagement journey in the regulators’ paper.

More prominently, the strategy makes reference to two specific areas for further work. The first – reviewing the consumer pensions journey – will seek to look at things from a different perspective: the customer’s. This sounds like a comprehensive study of how everything fits together for people trying to navigate the world of pensions, and is a welcome step. Plenty of studies have focused on very specific aspects of pension provision, but this provides an opportunity to take stock of where we have got to.

Undoubtedly, it will give rise to criticism of certain elements, but perhaps more importantly it gives us the chance to do a grass roots review of just how much information we provide and the extent to which it actually all adds value.

This is a golden opportunity for simplification.

The second – driving value for money – is also a welcome development. Now affectionately shortened to VfM, this is nothing new, but there are certainly many trustees and governance committees crying out for greater clarity in this area. The important thing here is not to get bogged down in detail, especially if it leads to providing more detail to consumers. 

It was encouraging to see plans for strengthening the work on preventing scams. Relatively few people are affected by pension scams, but the impact for those who are is devastating. The best defence will be to help consumers themselves to spot them, and the work already kicked off by the regulators in this area is helping here.

Naturally, both regulators remain concerned about DB transfers, and so it is no surprise that further work is planned in this area. Everyone recognises the importance of getting this right.

There are a number of mentions of schemes operating at sub-scale, and it is easy to conclude that we will likely see further consolidation of trust-based schemes – including master trusts – as a result.

We see this trend in many other countries, where the initial market clamour is followed by a slow reduction in providers in the pursuit of scale to deal with the costs of ever-increasing compliance.

Finally, it is encouraging to see that environmental, social and governance features as a future theme. I suspect it is more than that.

With long-term investment capital increasingly tied up in pensions, the potential to make a difference will only increase. And of course there are also ethical considerations, and sustainability, and many other words that people have used in this arena. They all have merit, and the whole subject is gaining momentum, deservedly so. 

All in all, this is a very welcome paper. Rarely can we take a step back and think strategically. Even more rarely can this be done inclusively and collaboratively. I think the FCA and TPR have managed that here. So far, so good.

Jamie Jenkins is head of global savings policy at Standard Life