One-year review of Investment Pathways expected in spring 2022

The Financial Conduct Authority (FCA) has warned that there will be limits on what can be “meaningfully evaluated” about Investment Pathways at its one-year implementation review, which is expected to begin in spring 2022.

In a letter to the Work and Pensions Committee (WPC), the FCA confirmed that it intends to share its learnings throughout the review with The Pensions Regulator (TPR) and Department for Work and Pensions (DWP), with TPR welcoming the sharing of lessons.

The WPC previously raised concerns that TPR was not making the same progress as the FCA on introducing similar protections as seen in the Investment Pathways, although the DWP has confirmed plans to launch a call for evidence on trust-based pension protections, also in spring 2022.

In addition to progress on Investment Pathways, the joint letter from FCA executive director, markets, Sarah Pritchard, and TPR executive director of policy, analysis and advice, David Fairs, addressed queries as to how information on the stronger nudge is being shared.

It emphasised that the regulators are working closely with DWP on the proposals and plan to “continue that close-co-operation”, clarifying however, that whilst it remains important to both organisations to deliver the same or similar outcomes for savers, they are subject to different regulatory frameworks.

“Establishing the effectiveness of the policy will primarily fall to the FCA and DWP, and the Money and Pensions Service (Maps) will also play an important role in monitoring take up," it said.

“That is why, going forward, it is important for all four organisations to share information and findings about the progress of the stronger nudge policy.

"We have regular dialogue at different levels within the organisations, and we are confident that the right information will be shared at those meetings. This information sharing will build on joint work that we already undertake.”

However, the letter also argued that the focus should not be isolated to the point of access, suggesting that savers would benefit from guidance about their savings earlier on while they are still building their pot.

Indeed, TPR and FCA launched a joint call for input earlier this year on the pension consumer journey, seeking views on what more it can do to help engage consumers.

The regulators also provided an update on joint work being done to identify a way to target individuals rather than holders of pension pots for an automated Pension Wise appointment trial, in light of the fact that many individuals may have more than one pension.

The letter explained that as individual consumers often have multiple pension pots, an individual firm or trust-based pension scheme is not in a position to take a holistic view of an individual's pension savings.

However, it suggested that, in the short term, and "specifically for the purposes of designing trials", it is reasonable to assume that a consumer is an active member in only one pension, especially in a workplace context.

The letter explained: “Focusing on active members may therefore mitigate the risk that consumers are invited to multiple appointments and is a reasonable basis for designing trials on how to increase take up of MoneyHelper guidance.

“There may be other possible future options. For example, over time, the pensions dashboards will help consumers have a better understanding of the range of pensions they have.

“We will keep under review how it may be possible to leverage this understanding of the consumer’s pension savings to support their guidance needs.”

The FCA had previously confirmed at a prior WPC hearing in September that it would be open to a trial of auto-booking appointments to assess whether it would be workable.

Despite this, the regulators again reiterated the argument that there needs to be a more holistic look at how to support savers at all the various different stages of their pensions lifecycle so that they receive the right guidance at the right time.

“The Maps pension guidance transformation programme is looking more broadly at the pensions journey – we will remain engaged with them and DWP as their programme develops to identify whether there are other policy solutions that can support people throughout their pensions journey,” it stated.

The comments from the regulator echo the views previously shared by the DWP at a recent WPC hearing, where it was argued that different approaches are needed at different life stages.

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