FCA to probe providers over private pensions

Hannah Godfrey reports...

The Financial Conduct Authority (FCA) is to probe private pension providers for data to investigate whether there is effective competition in the private pension marketplace.

On Friday, the regulator released a discussion paper that sought to take the first steps in learning whether competition is working well in the non-workplace pension marketplace, or if there is a need to go further to protect consumers.

The paper revealed the FCA plans to gather data from providers concerning their products, charges and means for ensuring fair outcomes to customers. It also plans to undertake “qualitative consumer research”.

The regulator said if harm was identified through its diagnostic work, it would develop “appropriate proportionate interventions for consumers in a subsequent publication”.

It estimated non-workplace pensions collectively represent around £400bn of assets under management (AUM) – more than double the amount invested in contract-based defined contribution workplace pension schemes.

The non-workplace pension market has seen an increase in self-invested personal pension (SIPP) sales since the Retail Distribution Review in 2012, while stakeholder pensions have gone the other way. As the following chart from the paper shows, SIPP sales more than doubled in 2013 and have continued to rise.

The FCA said it was keen to hear of insight and evidence that influence provider and consumer behaviour in the marketplace from all interested parties across industry and consumer groups, by 27 April 2018.

Towards the end of the year, it intends to publish a further paper, which will provide feedback on the theme arising from the responses to the discussion paper and data collection.

‘Indirect cost to consumers’

FCA executive director of strategy and competition Christopher Woolard said: “In recent years we, alongside the Department for Work & 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.”

Dentons director of technical services Martin Tilley said it was not unreasonable for the regulator to want to remain well-informed about the marketplace.

“Pension freedoms have had a considerable impact in increasing this market and those actively leaving defined benefit schemes for greater flexibility elsewhere will also have caused concern,” he said.

“It would be encouraging though if, instead of headlining the consultation as a means of identifying consumer harm, the regulator could embrace the concept of good practice that already exists in the marketplace and use this as means of encouraging consumer contact with providers and advisers for the guidance and advice opportunities that are already available,” he added.

“The FCA might also acknowledge the indirect cost to consumers of the regulatory impact on providers.”