The Pensions Regulator and the Financial Conduct Authority have said they want the industry to look "beyond narrow compliance" and consider consumer outcomes.
In an update to the regulators' joint regulatory strategy, published today (December 7), TPR and the FCA said following "specific rules" will not be enough anymore, as the consumer duty is set to take hold in July 2023.
"We want firms to consider the needs and types of consumers at the different stages of their pension journey and tailor their offering to them, with a focus on ensuring consumers achieve good outcomes," the regulators said in the update.
"We think this can be achieved without introducing prescriptive rules."
TPR and the FCA have asked firms to consider how they engage consumers, including making the most of opportunities to interact with consumers at different points in their pensions’ journey. These outcomes include:
- Products and services
The regulators said pension firms’ products and services need to be designed to meet consumers’ needs and targeted at those consumers.
- Price and value
The regulators want all consumers to receive fair value. Firms will need to ensure that there is a “reasonable relationship” between the price paid for a product or service and the overall benefit a consumer receives from it.
- Consumer understanding
A big focus of the joint strategy is firms’ communications about financial products and services. It said communications need to be “fair, clear, and not misleading”.
The regulators added: “Firms will need to go further and consider their overall approach to communicating information to make sure they equip consumers to make effective, timely and properly informed decisions.”
- Consumer support
Finally, firms need to provide a level of support that meets consumers’ needs throughout their relationship with the firm.
“The support firms provide should enable consumers to realise the benefits of the products and services they buy and ensure they are supported when they want to pursue their financial objectives,” the regulators explained.
TPR and the FCA also said they “welcome[s]” the announcement by pension providers and schemes of a co-ordinated industry campaign to boost understanding and engagement with pensions.
“We welcome the constructive engagement so far with FCA-regulated firms on the consumer duty which will require firms to deliver good outcomes for consumers,” they said.
“In the context of pension products, this will include enabling and supporting savers to pursue their financial objectives”.
The pensions regulator is currently working with the Department for Work and Pensions to consider how to “further support" savers, including through the FCA’s new consumer duty.
It said work in this area “ties in closely” with wider FCA work on advice and guidance.
“As part of this, the FCA has been working with firms to explore their concerns around providing more support to savers in the context of accessing their pensions,” the regulators explained.
“We are exploring options for giving them greater confidence about the advice/guidance boundary, recognising that the consumer duty requires firms to deliver good outcomes for these savers.