The Financial Conduct Authority (FCA) has set out new rules for cost disclosure for contract-based pension schemes, with default funds now required to publish cost and charges data by 31 July 2021.
The rules come into effect from April 2020, but from January 1 to December 31, 2020, governance bodies, such as Independent Governance Committees (IGCs) and trustees, will only have to report on default funds.
The FCA said it planned to phase in its requirements for schemes to publish comprehensive data regarding costs and charges levied on workplace pensions.
According to the Financial Times, the measures come seven years after the Office of Fair Trading (OFT) estimated that up to £30bn of savers’ money was stuck in “poor value” workplace pensions due to complex and opaque charging structures.
Steven Cameron, pensions director at Aegon said: “The FCA’s drive to make advice in the Defined Benefit (DB) transfer market of consistent high quality should be fully supported and many of the proposals in its latest consultation are welcome. However, no matter how well intentioned these interventions are, advisers remain concerned over some of the measures, particularly as they carry the risk of dramatically reducing the supply of advice. We would encourage the FCA to take on board the concerns of advisers ahead of finalising their next set of rules.
“The market is divided on whether or not contingent charging should be allowed for advice on transferring from a DB scheme. But what is clear is the overwhelming majority of advisers feel a ban will reduce access to advice.”
“The market is divided on whether or not contingent charging should be allowed for advice on transferring from a DB scheme. But what is clear is the overwhelming majority of advisers feel a ban will reduce access to advice. The issue is that some individuals aren’t able to pay upfront for advice and without the option of contingent charging, won’t seek it. Advisers also need more detail on how the ‘carve-outs’ from the ban will work. The FCA needs to frame these in a way that makes them sufficiently objective for advisers to use with confidence, without being unduly prescriptive.
“The proposed introduction of ‘abridged advice’ receives a tentative welcome from advisers with the potential to allow advisers to cost-effectively ‘filter out’ DB members not suited to transferring. However, advisers remain hesitant that this new service with full fact find will save sufficient time and hence money to appeal to customers.
“Advisers also raise concerns over proposals which would tilt the balance towards using workplace schemes to receive DB transfers saying it could reduce their ability and willingness to offer transfer advice. Workplace schemes should be considered, particularly if they offer lower charges, but many are unable to accommodate adviser fees and investing in the default fund may not be suitable, particularly for large transfers or for those approaching retirement.”