The People’s Pension1 has published its response to the Financial Conduct Authority’s (FCA) discussion paper on adapting the regulatory framework for a changing pensions market.
With millions of UK savers relying on workplace pensions for their retirement, The People’s Pension is calling for greater transparency and industry-wide collaboration to ensure pension transfer decisions are made in the best interests of savers.
The impact of misinformed transfers
Research from The People’s Pension highlights the significant impact that pension transfers can have on long-term retirement outcomes. Analysis shows that individuals could miss out on as much as 20% of their pension savings due to misinformed transfer decisions, equating to a potential loss of £1.2bn across the UK in just one year.
Further research, conducted in partnership with the Behavioural Insights Team (BIT), found that financial incentives such as free cash offers can lead savers to transfer their pensions without fully considering the long-term consequences. Additional research with Ignition House found that many struggle to assess the impact of pension charges, with some assuming that any fee under 1% is the same, despite the potential for significant financial differences over time.
Five key reforms to improve pension transfers
In response to the FCA’s consultation, The People’s Pension is calling for five key reforms to create a more transparent and consumer-focused pension landscape:
- Clear, comparable pension information: A requirement for pensions providers to display simple, comparable, and easy-to-find information on investment performance, charges and customer service.
- A ban: Pension transfer incentives to be banned.
- A consumer-focused Value-for-Money framework: Pension providers and regulators to work together to create a consumer facing Value-for-Money framework to help savers make more informed decisions.
- Delaying commercial pension dashboards: Commercial pension dashboards to be delayed until Value-for-Money metrics are displayed across all pensions.
- Mandatory scheme comparisons during transfers: An obligation on the receiving pension scheme to flag important differences between pension schemes, which may impact the final retirement pot, when processing a transfer.
A more transparent and saver-focused future
Patrick Heath-Lay, CEO of The People’s Pension, said:
“For too long, savers have been left in the dark when making pension transfer decisions – that needs to change. We’ve been campaigning for a step change in transparency, and this consultation is a crucial moment to fix a system that isn’t working in saver’s best interests.
“Our five-point plan sets out practical reforms that would create a more transparent and consumer-focused pensions landscape, helping to secure better retirement outcomes for millions of UK workers. This would ensure people can make informed choices about their future,. While the consultation is a step in the right direction, the industry must now work together to make it happen.”
The People’s Pension looks forward to working with the FCA and the wider industry to implement reform and ensure pension savers receive the clarity and protection they need when making important financial decisions.
ENDS
Notes to Editors:
- The People’s Pension is provided by People’s Partnership and is one of the largest independent master trusts in the UK, serving nearly seven million pension savers and more than 100,000 employers across the UK and manages more than £32bn in assets. As a business without shareholders, it reinvests its profits with the aim to help customers and achieve better financial outcomes for everyone.