FCA and TPR rule out new pension saving regulations

In a feedback statement released on June 7, the watchdogs said that although the pensions industry had highlighted the need for regulators and the government to ensure their efforts are co-ordinated, at this point they do not think proposing new rules is the right approach.

In May last year, the regulators launched a call for input from the pensions industry on what influences consumers when saving into a pension and how they can be better supported to improve their pension savings.

It said the views gathered would inform policymaking and be used to target any future regulatory interventions to improve consumer pension journeys.

The changing nature of work and retirement means there can’t be a one-size-fits-all approach to delivering good engagement with pensions

David Fairs, TPR

Communication issues

In its feedback, the pensions industry said that given the low levels of consumer financial literacy, there remains “real difficulty” in pension communications, and that savers need tailored support throughout their lifetimes. 

Potential solutions to the inequalities in pension outcomes were suggested by respondents, including offering support to women returning to work or improving access to sharia-compliant funds.

In response to this, TPR announced that it will work with the Money and Pensions Service to “produce guidance that enables employers to support staff returning to the workforce”, and look at how they can promote existing guidance from MoneyHelper around divorce and maternity leave.

The watchdog will also conduct an “equality review to understand how well the market works for different groups of savers to inform regulatory responses”, it added.

TPR will be reviewing the communicating to members’ section of the defined contribution schemes guidance “to provide more information on inclusivity, use of behavioural insights and timing of communication”.

In addition, master trusts and large providers said they would like to do more to support consumers but were concerned about straying into regulated or unsolicited marketing activity. 

“These respondents highlighted the importance of consumers receiving the right support at the right time to deliver good outcomes,” the statement said, which included pensions dashboards as a potential key tool in enhancing pensions engagement.

However, respondents recognised that despite these efforts, many savers will never engage with their pension.

“This is why it was important to drive value for money in DC schemes,” the report stated.

Consumer harms

The regulators outlined the three main harms facing consumers and pensions, which are that individuals struggle to make decisions that optimise their pensions saving, remain in badly performing products and are susceptible to scams.

The statement said respondents agreed that the drivers that lead to these harms include behavioural biases (for example, risk aversion or overconfidence in financial matters), structural issues (types of employment, gender, ethnicity or disability), and barriers to engagement (including difficulty in moving products).

David Fairs, TPR’s executive director of regulatory policy, analysis and advice, said: “The changing nature of work and retirement means there can’t be a one-size-fits-all approach to delivering good engagement with pensions and we look forward to working with industry on innovations that help deliver communications that work for all savers.”

He said the government, regulators and industry should be clear on the outcomes they want to achieve and work towards enhancing and protecting all savers’ pensions.

“Respondents’ feedback confirmed the need for us to be explicit in our goals and reinforced the importance of driving value for money across the pensions saving journey,” Fairs added. 

“We will use these insights to guide our future work and help consumers make the most of their retirement savings.”

This article first appeared on FTAdviser.com