Regulator shines spotlight on workplace pension value for money
A two-year review of Independent Governance Committees (IGCs) and Governance Advisory Arrangements (GAAs) – which act in the interest of workplace pension scheme members – found a lack of consistency in the way they operate.
As a result some workplace pension scheme members may not be receiving value for money.
It also found a lack of independence, with some providers ineffective at challenging firms to ensure value for money.
Where independence was apparent, the FCA said better outcomes were delivered for scheme members.
The FCA also noted that over the period of its review (2017-2019), there was a small reduction in charges across all pension savings, though this couldn’t be linked to the work of IGCs and GAAs.
Along with the findings of its review, the FCA has launched a consultation on proposals to make it easier for GAAs and IGCs to compare value for money of pension products and services, ensuring members get a fair deal.
It wants to see a definition of value for money and three key elements of value when IGCs, which act on behalf of consumers, conduct assessments.
Megan Butler, executive director of supervision – investment, wholesale and specialists at the FCA, said: “This consultation paper will help to ensure that pension scheme members are getting value for money.
“Our separate review into IGCs and GAAs lays out the key lessons that need to be learned to ensure that workplace pension holders get a fair deal.
“The FCA has carefully considered these findings and is asking firms that do not meet our requirements to make improvements.”
The consultation runs until 24 September.
‘Workplace pensions have become fat and complacent’
Moira O’Neill, head of personal finance at Interactive Investor, said: “Workplace personal pensions have flown under the regulatory radar for far too long. They have become fat and complacent, relying on customer inertia, shiny branding and exit charges to continue to deliver poor customer outcomes at a high cost. We hope this consultation shines a spotlight on an industry that has grown unchecked for far too long.
“It won’t always be in people’s best interests to switch, but people need to be able to weigh up their options. Sadly, too many workplace personal pensions are still shrouded in mystery and people need to be made much more aware of the poor value for money some workplace pensions schemes are offering – particularly the old ones. This consultation is a welcome start, but we would urge the regulator to go a step further and look at transparency more broadly.”