In a feedback statement released this morning (June 7), the Financial Conduct Authority and the Pensions Regulator said although the pensions industry had highlighted the need for regulators and the government to ensure their efforts are co-ordinated, at this point, they do not think proposing new rules is the right approach.
In May last year the regulators 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.
It said the views gathered would inform policy making and be used to target any future regulatory interventions to improve consumer pension journeys.
Communication issues
In its feedback, the pensions industry said given the low levels of consumer financial literacy, there remains “real difficulty” in pension communications, and savers need tailored support throughout their lifetimes.
Potential solutions to the inequalities in pensions outcomes were suggested by respondents, including offering support to women returning to work or improving access to sharia compliant funds.
In addition, master trusts and large providers said they would like to do more to support consumers but were concerned about straying into regulated or unsolicited marketing activity.
“These respondents highlighted the importance of consumers receiving the right support at the right time to deliver good outcomes,” the statement said, which included pensions dashboards as a potential key tool in enhancing pensions engagement.
However, respondents recognised that despite these efforts, many savers will never engage with their pension.
“This is why it was important to drive value for money in DC schemes,” the report said.
Consumer harms
The regulators outlined the three main harms facing consumers and pensions, which are that individuals: struggle to make decisions that optimise their pensions saving, remain in badly performing products and are susceptible to scams.
The statement said respondents agreed that the drivers that lead to these harms include behavioural biases (for example risk aversion or overconfidence in financial matters), structural issues (types of employment, gender, ethnicity or disability), and barries to engagement (including difficulty in moving products).
Executive director of regulatory policy, analysis and advice at TPR, David Fairs, said: “The changing nature of work and retirement means there can’t be a one-size fits all approach to delivering good engagement with pensions and we look forward to working with industry on innovations that help deliver communications that work for all savers.”
He said the government, regulators and industry should be clear on the outcomes they want to achieve and work towards enhancing and protecting all savers’ pensions.
“Respondents’ feedback confirmed the need for us to be explicit in our goals and reinforced the importance of driving value for money across the pensions saving journey.
“We will use these insights to guide our future work and help consumers make the most of their retirement savings.”
sally.hickey@ft.com
