Much discussion and deliberation has followed the rise of companies’ defined contribution schemes, and for some they have also faced tough questions about managing people still within defined contribution arrangements.
However, the Financial Conduct Authority (FCA) has turned its gaze onto individual private pensions – also known as non-workplace pensions. It is believed that one-in-four adults have benefits within these pensions, representing some £400bn in assets under management (double the figure within DC schemes).
“We believe it is now right to look at the other side of the picture and assess whether competition is working in non-workplace pensions.”
Understandably, the discussion document sets out a number of potential issues and tensions that the FCA believes could adversely affects the administering, management of these schemes, and the market itself.
Areas of focus include:
- product complexity. Most pensions are complicated products and could make it difficult to assess performance, particularly in the long-term;
- what could make it difficult for consumers to spend time to consider their product and service choices;
- the ability of customers to switch products and services freely and easily; and
- fund choice and the use of defaults. The FCA is concerned that informal defaults may be operating in the market for non-workplace pensions that are not subject to the same protection as defaults in workplace pensions.
Christopher Woolard, FCA executive director of strategy and competition, said: “In recent years we, alongside the Department for Work and Pensions and the Pensions Regulator, have taken a number of steps to address weaknesses in the workplace pensions market. We believe it is now right to look at the other side of the picture and assess whether competition is working in non-workplace pensions.”
The 39-page document sets an overview of the market as one which is growing, particularly with multiple employment statuses open to people. Pensions freedom, which came into force from 2015, has also driven flexibility around pensions arrangement and access choices.
This was written by editorial staff at Professional Adviser. All views are from the publication.
Further reading on this topic: