The City watchdog and the Pensions Regulator have teamed up to investigate how people make decisions about their pension at key points throughout their working lives, in order to better support savers through future regulation.
The regulators today (May 18) launched a call for input from the pension industry on what influences consumers when saving into a pension and how they can be better supported to improve their pension savings.
The views gathered will inform policy making and will be used to target any future regulatory interventions in areas which will improve consumer pension journeys the most, the regulators said.
Sheldon Mills, executive director consumers and competition at the FCA, said: “Automatic enrolment and pension freedoms have changed the pensions landscape. Individual consumers now have more responsibility than ever before for making decisions about their pension savings.
“It is important our regulation keeps up with what is happening in reality. We want to hear about what is working well and where the consumer journey can be improved.”
In the 19-page document, the Financial Conduct Authority and TPR said the key risks to savers were decision making to optimise pension saving, badly-performing products and scams.
According to TPR and the FCA, engaged and supported consumers, with access to suitable guidance and regulated financial advice, were more likely to understand how the decisions they make will impact their retirement while those who remain disengaged were more susceptible to scams.
Richard Edes, interim director of strategy and risk at TPR, said: “The past decade has seen a pensions revolution with many more savers now putting something away for retirement.
“But decisions made by savers, some that they aren’t even aware of, can have a significant impact on the kind of retirement outcomes they can expect.
“That’s why we want views on how we can improve the pensions consumer journey, putting savers at the heart of all that we do and supporting them now and in the future.”
The regulators explained there were several drivers – including behavioural biases, structural issues and barriers to engagement – that added to the risks faced by savers.
Behavioural biases include short-termism, where savers focus on their current needs rather than planning for retirement, and risk aversion, where they see their pensions as more of a gamble due to investment risk.
There can also be a lack of confidence in financial matters, which could delay the age at which younger savers engage with their pensions. But they also pointed to the risk of overconfidence which could lead to savers not taking advice or guidance.
Structural issues identified by the regulators included employment, gender, ethnicity and disability, which can lead to lower income in retirement or a lack of engagement or poor choices.
The regulators are asking what more can be done to enhance engagement and support savers in their decision making.
They claimed that better alignment with different generations of savers’ needs and values could boost engagement.