Regulator turns its attention to the private pensions market
The FCA said that at least one in four adults have accumulated benefits in non-workplace pensions and it wants to understand whether competition is working well and if there are issues that need to be addressed in order to protect consumers.
Christopher Woolard, FCA executive director of strategy and competition, said: “In recent years we, alongside the Department for Work and Pensions and The Pensions Regulator, have taken a number of steps to address weaknesses in the workplace pensions market. We believe it is now right to look at the other side of the picture and assess whether competition is working 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.”
In particular, the FCA is looking to focus on product complexity, factors which may reduce consumer motivation on pension decisions, whether customers can identify and freely move to more competitive products and fund choice and the use of defaults. The regulator will also look at whether providers are competing on charges and if there are barriers to consumers identifying, and choosing, from more competitive products.
Tom Selby, senior analyst at AJ Bell, said: “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.”
Tom McPhail, head of policy at Hargreaves Lansdown added that the character and size of the non-workplace pensions sector has changed significantly in recent years, with the bulk of new arrangements set up in recent years being SIPPs.
He said: “There’s evidence many investors are actively engaging with their savings, making choices about how their money is managed and invested. There are also understandable regulatory concerns about legacy books of business and ‘forgotten pensions’. This discussion paper will be a good opportunity to explore these issues.”