The Financial Conduct Authority (FCA) and the Pensions Regulator (tPR) launched a joint call for input on how the consumer pensions journey can be improved. In addition, they aim to understand more about how savers make pension decisions at key points throughout their working lives. The call for input intends to prompt a “broad discussion” within the industry to help gain insights that will shape future targeted regulatory interventions, with views sought on how savers can be better supported to achieve improved outcomes.
As a result of automatic enrolment, more people are saving for their retirement than ever before. Richard Edes, tPR interim director of strategy and risk, commented: “The past decade has seen a pensions revolution with many more savers now putting something away for retirement.” There has also been a “seismic shift” in the pensions landscape since the launch of automatic enrolment, with 15 times as many savers in defined contribution pension schemes than in defined benefit pension schemes.
The FCA and tPR noted that this shift has seen savers carrying more of the risk in planning for their retirement as a result of being able to take more decisions during the process of this planning. Despite this shift, there has been a distinct lack of consumer engagement with their pensions; most new automatic enrolment pension savers only make minimum level contributions and 99% of new savers stay within the default fund, relying on others to make decisions on where their money is invested. This backdrop prompted regulators to explore the factors affecting consumers and to find ways of improving the journey from joining the workforce to retirement.
In particular, the regulators are keen to know whether the current understanding of the consumer journey is an appropriate foundation for regulatory policy-making, as well as queries around the identification of overarching harms, structural issues and behavioural biases. One particular factor on which the FCA and tPR are focusing is the impact of gender, ethnicity, disability and other protected characteristics on pensions savings.
This latest call for input ties in with work the FCA reported on last year around inter-generational differences, which pension providers should also take into consideration. This space should be watched carefully for further signs of regulatory intervention and calls for embracing innovation and technology to address consumer harms. The introduction of pensions dashboards is one step in this direction that is already in the process of materialising and others are likely to follow.