FCA and TPR look to improve consumer pensions journey in joint call for input

The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have launched a joint call for input to seek views on how the consumer pensions journey can be improved, and how savers make pension decisions at key points throughout their working lives.

The call for input aims to prompt a "broad discussion" with the industry to help gain insights that will shape future targeted regulatory interventions, with views sought on how savers can be better supported to achieve improved outcomes.

The regulators said there had been a “seismic shift” in the pensions landscape since the launch of automatic enrolment, with 15 times as many savers in accumulation within defined contribution than in accumulation within defined benefit (DB) schemes.

Indeed, the FCA and TPR explained this shift has seen savers carry more of the risk in planning for their retirement and have more decisions to make than ever before.

This in turn has prompted the launch of the call for input, with the regulators looking to explore the factors affecting consumers and to find ways to improve the journey from joining the workforce to retirement.

Specific areas highlighted include questions as to whether the current understanding of the consumer journey is an appropriate foundation for regulatory policy making, as well as queries around the identification of overarching harms, structural issues, and behavioural biases.

Commenting on the announcement, TPR interim director of strategy and risk, Richard Edes, 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.”

FCA executive director consumers and competition, Sheldon Mills, added: “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.”

Responding to the announcement, AJ Bell senior analyst, Tom Selby, stated that pensions have been "crying out" for a more joined-up approach from the two main regulators for years.

“This call for input feels like a genuine step in the right direction on that front, assessing the pension saving journey from cradle-to-grave," he continued.

"This approach should help ensure interventions are applied in the same way across different types of pensions.

“Furthermore, it offers an opportunity to review and hopefully simplify the communications providers are currently required to send out to savers."

Selby noted that various pieces of behavioural research have shown that when it comes to improving understanding of concepts like retirement saving, "less is usually more".

“The rules governing pensions communications have been built up over years and often lead to far too much paperwork being sent out to savers which, frankly, most people simple chuck straight in the bin," he added.

“As the government strives to introduce simple two-page annual statements and pensions dashboards development continues, now feels as good a time as any to conduct an overarching review to make sure the communications rules are fit for the 21st century.

“This in turn should help ensure more savers are armed with the information they need to make good decisions with their hard-earned retirement pot.”

Interactive Investor head of personal finance, Moira O'Neill, also argued that there needs to be more tools to help people prepare their finances for both the best and the worst of times, as well as for key life events that they might not have thought ahead for.

“Time and again, our research has found that unexpected life events can derail retirement plans," she continued.

“Part of the solution is already there. Currently pension providers are required to distribute at age 50, and every five years until the client’s pension pot is fully crystallised, a ‘wake up’ pack.

"These include a one-page headline document, setting out the options for people as they consider whether to access their retirement savings under the pension freedoms."

However, she argued that the alarm needs to be set "far sooner" to coincide with key life events, also calling for more engaging online tools to play a part in this, and prove "invaluable" for those going through a divorce, for instance.

"It could also prove useful to young adults who have started their first job after finishing university, because the sooner you begin saving, the more time your money has to grow. It’s time for more imagination, and we look forward to feeding back on this call for input," she added.

Pensions and Lifetime Savings Association director of policy and advocacy, Nigel Peaple, also highlighted the launch of the joint call for input as a "positive", noting that government policy has an important role to play alongside industry engagement.

He stated: "People struggle to engage with their pension for a range of reasons: complexity, behavioural biases, short-termism and a lack of confidence.

"While the regulators are right to think about the role they and the industry can play in addressing these issues – not least through better planning and engagement tools such as the retirement living standards – we should not forget the important role that government policy can play in solving these issues.

"This is why the PLSA believes that the default level of automatic enrolment contributions should increase to 12 per cent around the end of this decade and that more support should be given to savers at retirement, as set out in our proposals for Guided Retirement Income Choices.”

The call for input runs until 30 June, with the view from this expected to inform policy making and to be used to target any future regulatory interventions at areas "of greatest benefit to consumers".

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