The Financial Conduct Authority has launched a discussion paper to gain an understanding of competition in the non-workplace pensions market.
With individual private pensions currently representing around £400bn assets under management and more than double the amount invested in contract-based defined contribution schemes, the FCA is looking to better understand the sector.
The FCA has said it is looking to gauge whether competition is working well and if there are issues that need to be addressed in terms of consumer protection.
The discussion paper considers the differences and similarities between workplace and non-workplace pensions. These include product complexity, factors affecting consumer motivation and interest in their pensions, whether customers can identify and freely move to more competitive products, as well as fund choice and the use of defaults.
In addition, the FCA will consider whether providers are offering competitive charges and if there are obstacles keeping consumers from identifying and selecting more attractive products.
The FCA is seeking feedback from involved parties by 27 April 2018.
FCA Executive Director of Strategy and Competition Christopher Woolard explained that while the body, along with the Department for Work and Pensions and The Pensions Regulator have addressed the workplace pensions market in recent years, it now feels that it is time to assess competition in non-workplace pensions.
“A diverse group of people save into non-workplace pensions and it is a growing market. We want to hear from anyone with an interest in this subject about how they think the market is working,” he said.
With the launch of the discussion paper AJ Bell senior analyst Tom Selby commented: “Following the OFT review of the workplace market and the growing popularity of SIPPs in the wake of the pension freedoms, it makes sense for the FCA to scrutinise competition in the non-workplace market.
“It is vital for the integrity of the UK pension system that savers are confident the products they invest in are value-for-money. Furthermore, our own research points to an engagement gap emerging in the post-pension freedoms world, with many savers completely in the dark over how their retirement pot is invested.”
Royal London director of policy Steve Webb added: “We very much welcome this review and want to see a competitive market for individual pensions, with well-informed consumers, supported by expert impartial financial advice, making good decisions. We hope that the FCA review will reinforce the importance of advice in ensuring consumers do not fall victim to scams and in helping people to manage their money effectively in line with their long-term goals. There is a real risk of a culture of DIY investing where individual investors are unaware of the risks that they are taking and will end up with poor outcomes.”