TPR and FCA join forces to improve pension saving outcomes

By Hope William-Smith

The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) are asking the industry for feedback on how to improve customer decisions about pensions at key life points.

In a joint call for input today (18 May) the regulators acknowledged the “seismic shift” in the pensions landscape since the 2012 introduction of auto-enrolment – notably the continuing move from defined benefit (DB) schemes into defined contribution (DC) arrangements.

“This shift means savers carry more of the risk in planning for their retirement and have more decisions to make than ever before,” they said.

The two will now work to explore the factors which affect how consumers save for retirement, with the aim of improving the journey from joining the workforce until the end of their career.

Insights gained from today’s call for input will then be used for “targeted regulatory interventions” in the future.

“We want views on how we can improve the pensions consumer journey, putting savers at the heart of all that we do and supporting them now and in the future,” said TPR interim director of strategy and risk Richard Edes.

“The past decade has seen a pensions revolution with many more savers now putting away something for retirement, but decisions made by savers – some that they aren’t even aware of – can have a significant impact on the kind of retirement outcomes they can expect.”

Employment type, structural societal issues, and behavioural biases were identified as factors heavily influencing savers’ engagement with their pensions journey. The regulators also noted barriers from the nature of pensions themselves, including low financial capability and difficulty in changing products, as influential.

FCA executive director consumers and competition Sheldon Mills said regulation “needs to keep up with what is happening in reality”.

“We want to hear about what is working well and where the journey can be improved,” he added.

The regulators are calling for responses from a broad range of interested parties including, but not limited to pension providers; trustees; consumer groups; academics; employers; and trade bodies.

‘Cradle-to-grave

AJ Bell senior analyst Tom Selby commented: “Pensions have been crying out for a more joined-up approach between the two main regulators for years.

“This call for input feels like a genuine step in the right direction on that front, assessing the pension saving journey from cradle-to-grave. This approach should help ensure interventions are applied in the same way across different types of pensions.”

He added: “Furthermore, it offers an opportunity to review and hopefully simplify the communications providers are currently required to send out to savers. We know from various pieces of behavioural research that, when it comes to improving understanding of concepts like retirement saving, for most people less is usually more.

“The rules governing pensions communications have been built up over years and often lead to far too much paperwork being sent out to savers which, frankly, most people simple chuck straight in the bin.

“As the government strives to introduce simple two-page annual statements and pensions dashboards development continues, now feels as good a time as any to conduct an overarching review to make sure the communications rules are fit for the 21st century.

“This, in turn, should help ensure more savers are armed with the information they need to make good decisions with their hard-earned retirement pot.”