The Financial Conduct Authority (FCA) has launched a consultation on the intergenerational implications for pensions in both accumulation and decumulation for savers.
In the document – unveiled today (2 May) – the watchdog said it is seeking views on a broad range of financial circumstances and needs, which includes pensions, across three generations: baby boomers, generation X and millennials.
The FCA wants to know if there are other intergenerational implications for pensions other than auto-enrolment (AE) which was introduced in 2012, and Freedom and Choice which came into force in 2015. It said, together with increased life expectancy and labour market developments, these developments influence the ways in which people generate and access pension wealth.
It wants to know how far providers operating in this space are currently meeting changing consumer needs from different age groups. To the extent that this is not happening, the watchdog said it “welcomes feedback on possible reasons why this is the case, and on what we could do to encourage the industry to do so”. Furthermore, the FCA is inviting responses on if there is anything it can do to enable and encourage innovation in this space.
The consultation document states that retirement is changing as life expectancy increases, and the flexibility in how savers use their savings means they could face running out of pension savings and are more exposed changes in market valuations. It also said that evidence in the decumulation market of products has been very limited.
‘Big issue thinking’
Hargreaves Lansdown head of policy Tom McPhail said it was “good to see the FCA exploring this kind of ‘big issue’ thinking and looking at long-term consumer needs”.
He added: “It is likely the output from this exercise will not only inform regulatory policy, but may also present some helpful prompts to firms to think about how their products and services need to adapt to customers changing needs.”
The consultation closes on 1 August.
What the FCA wants to know
* If there other factors driving changes in the consumer needs of different generations that it should consider
* If there are there other ways in which the factors it has identified as driving changes influence how individuals from across different age groups build up and access wealth
* To what extent financial services providers currently meeting the changing needs across different age groups
* If there are any barriers that are adversely affecting access to, and use of, financial products that would meet new and changing consumer needs
* If there is anything more that it could do to encourage and enable positive innovation in these sectors, or to enhance competition in the interests of consumers
* If there is any market or firm behaviour that causes or may cause potential harm to consumers
* If there are areas related to intergenerational issues which fall more appropriately to government or another public body, but in which, in accordance with our objectives, we can play a role