Trust-based DC pension schemes need to be included in plans to offer guidance and support to groups of vulnerable savers, according to industry experts.
The Financial Conduct Authority (FCA) has set out plans to allow the pension providers it regulates – which offer contract-based defined contribution (DC) plans – to provide targeted support to certain groups of people, such as those at risk of running out of money through drawdown.
Zoe Alexander, director of policy and advocacy at the PLSA, welcomed the FCA’s proposal, adding: “We know savers want support when making decisions about their pensions and have long supported efforts on, for example, ‘guided retirement’ at decumulation.”
However, she called for more support for trust-based pension schemes, which are not covered by the FCA as they are overseen by the Pensions Regulator (TPR).
“Our members want to do more for savers, but they need clarity on what is possible without breaching FCA rules,” Alexander said. “We also need regulators to help the trust-based sector – as well as FCA-regulated firms – provide support of this kind to savers. This will help to ensure consistency of experience whichever type of pension they have.
“Too few people take regulated advice and many more can’t afford it; exploring options around targeted support will help FCA-regulated providers give savers what they need when they need it.
“We look forward to engaging with the detail, and exploring the broader issues raised in the discussion paper, including ongoing policy development that will impact saver engagement – such as modellers and tools, and transfers and consolidators.”
NatWest Cushon’s head of research and policy Steve Watson said the FCA’s proposals could be “revolutionary” for the pensions sector, adding: “If executed properly this could help so many people enjoy better retirements. Pensions are complicated and the more help people can get the better.”
He echoed Alexander’s comments on trust-based pension schemes, and called for the FCA and TPR to work together to ensure the guidance proposals applied clearly to all kinds of DC schemes.
“Many trustees will be concerned that offering any form of tailored support could entail regulatory risks, particularly if they are signposting products and potentially straying into regulated financial advice,” Watson said.
“There’s a unique opportunity for the FCA and TPR to work together to ensure trustees can be comfortable with the help they can offer. TPR in particular will be a crucial cog to make sure these rules are applicable in reality and that people do get the guidance they need.”
A spokesperson for TPR said: “It is important the pensions system works for everyone. Key to this is ensuring savers are properly supported to make good retirement choices with their pension.
“That’s why we welcome the FCA’s further thinking on how a new targeted support framework can ensure savers get the help they need to make informed decisions.
“We continue to work closely with government and regulatory partners, including the Department for Work and Pensions and the FCA, to put in place the right frameworks that encourage innovation in savers’ interests and ensure pension savers across contract-based and trust-based schemes are appropriately supported to navigate complex retirement choices.”
