The Financial Conduct Authority has promised it will monitor its interventions in the personal pensions space to determine what effect they have on the market, in a sign regulatory action could be coming this way.
In its Annual Report and Accounts 2018/19, out today (July 5), the watchdog stated that it is still analysing feedback to the consultation launched in February 2018 into the non-workplace pension sector, with a response to be published in the summer.
This work will allow the regulator to assess consumer engagement, price complexity and switching speed in the market, and the impact this has on consumers’ ability to make well-informed decisions. It will also create an assessment of competition in the market.
If this leads to remedial action from the regulator the FCA has promised it will carefully monitor what effect this has on the market, especially whether consumer harm is reduced.
When it launched the consultation, the FCA said it was concerned informal defaults may be operating in the market for non-workplace pensions that are not subject to the same protection as defaults in workplace pensions.
Individual private pensions are products such as individual personal pensions, stakeholder personal pensions, and self-invested personal pensions. They also include free standing additional voluntary contributions, s32 buyouts, and retirement annuities.
The FCA said, collectively, the market represents about £400bn of assets under management, which was more than double the amount invested in contract-based defined contribution workplace pension schemes.
It estimated at least one in four adults have savings in such schemes.
Martin Tilley, pension director at Hurley Partners, interpreted this to mean the FCA will be engaging with non-workplace pensions to check that the market is still competitive and appropriate.
He suspects the regulator will be paying attention to the parts of the market which have evolved and become more client fee friendly, so that "existing clients are not left behind in older higher charging vehicles".
He added: "As the FCA stated, the non-workplace pension arena is a very diverse universe of arrangements that are both advised and non-advised.
"This will be a huge task, and I’d suggest that it will be difficult to draw specific conclusions across the whole of the marketplace. The consumer engagement issue is in itself a tricky topic depending upon whether the client is advised or non-advised."
Jess List, pension technical manager at Curtis Banks, added: "Non-workplace pensions are likely to appeal to savers who require more flexibility than typical workplace schemes, and those who simply don’t have access to a workplace pension.
"There are many pension solutions suitable for different people at different stages of their lives, and it’s important that all of them work well for the consumers using them.
"It will be interesting to see whether the FCA’s research looks specifically at the type of savers using non-workplace pensions, and how much this influences their proposals."
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