As we near the end of a turbulent year for the pensions sector, talk naturally turns to what’s going to happen next. The Financial Conduct Authority has talked a lot about non-workplace pensions this year, and we’re expecting this to solidify into actual rule changes in 2020.
In July the FCA published a feedback statement following their consultation on non-workplace pensions – overshadowed to some degree at the time by the consultation on defined benefit transfers and the publication of final rules on retirement outcomes. But while it may not have made headlines at the time, it could result in regulations that have a huge effect on the pensions landscape.
There are 12.7 million non-workplace pension accounts in the UK, with non-workplace pension providers estimated to administer approximately £470 billion in assets, making the non-workplace market more than double the size of the market for contract-based defined contribution workplace pensions. Individual personal pensions make up the majority of this market (over 70%, in fact) but it also includes S226 Retirement Annuities, Section 32 buyout bonds and stakeholder pensions.
The FCA’s findings raised a few key areas that will most likely become the basis of regulations – first, that many consumers are not engaged with their non-workplace pension. Most participants in their research had low interest and low confidence in their pension and didn’t feel motivated to learn more about it. Part of this lack of engagement might be down to overly complex charges, with many consumers dealing with a mix of charges (advice, fund, product) which some providers bundled together and some do not, making it very difficult to establish a useful comparison between different options. In turn, that lack of the ability to compare could be part of why levels of switching are so low.
The FCA’s current proposed solutions are in-line with those they’ve applied to other areas. Key changes currently planned but not yet in place include propositions that providers will have to begin showing all charges in easily understood terms and the introduction of a “charges league table” to help consumers easily compare their options. Providers will also have to warn customers about the long-term effects of investing predominantly in cash and will have to offer ready-made investment solutions to non-advised consumers.
These new rules are expected to come into effect in August 2020. If your organisation is seeking regulatory support relating to pensions, Kind Consultancy has a bench of pre-qualified consults and case handlers who are available on short notice for contract projects or permanent roles and you can contact me on firstname.lastname@example.org or 01216432100 for a confidential discussion around how we can help. If you’re an individual who is concerned about their pension and interested in addressing your requirements, get in touch with our sister company Kind Wealth on email@example.com.