Regulators join forces with strategy to help people boost pension savings

A review to help people make well-informed decisions about their pensions is to be launched next year as part of a drive to boost savers’ retirement pots.

Two regulators – the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) – have joined forces with a strategy to deliver better outcomes for pension savers as well as people entering retirement.

The regulators said there are “concerns that many of the UK’s future pensioners will have to live on lower incomes than they expect and for longer.

“This is potentially a significant problem, with implications for millions of people and for public policy-makers.”

The review in 2019 is part of a pensions action plan which sets out priorities and will see the two regulators work more closely together.

The regulators will look at how people’s understanding, engagement and trust in pensions could be improved.

People can be put off by jargon and complex terms – and if people do not get to grips with their pension savings this can lead to them having little cash in retirement or less than they expected.

Next year’s review will look at the impact of information from pension providers and guidance and advice services on savers’ decision-making.

The review will look at the timing of how pensions information is communicated to savers as well as what is said.

Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: “All too often government and regulators investigate individual financial products or specific points in people’s lives such as retirement.

“These plans are helpful because they will look at the whole of our ‘pensions journey’ – from starting work and being enrolled into a pension, through building up a pension pot and making choices at retirement and through retirement.

“This should help them to see the bigger picture and produce better outcomes in the long term.”

Steven Cameron, pensions director at Aegon, said people need timely advice and guidance “to achieve a real breakthrough in consumer engagement, understanding and informed decision-making”.

Tom McPhail, head of policy at Hargreaves Lansdown, said: “We welcome the focus on helping and guiding investors to make better decisions.

“Achieving this will depend on pension schemes and providers having the latitude to personalise the guidance they deliver to their customers.”

Liberal Democrats annual party conference 2010
Liberal Democrats annual party conference 2010

The strategy identifies key issues which contribute to the prospect of people not having enough money in retirement.

Many people are only putting the minimum amounts into their workplace pension pots.

And fewer pension savers nowadays also have “gold-plated” defined benefit (DB) pension pots, which promise a certain level of retirement income, such as final salary schemes.

This means that, for many pension savers, the responsibility of the eventual size of their retirement pot lies with them and the decisions they make.

Meanwhile, with longer lifespans, some people may under-estimate how long their retirement pot needs to last for.

The average defined contribution (DC) pension pot at retirement is around £50,000.

Low income, savings and interest rate levels as well as high debts and the rise of self-employment and the gig economy also pose challenges to people’s abilities to build up a decent-sized pension pot.

Problems such as scams and poor pension transfer advice also put people’s savings at risk.

Christopher Woolard, the FCA’s executive director of strategy and competition, said: “With the support and collaboration of the Government, industry and consumers themselves, we can deliver an environment which contributes to people having higher incomes in their retirement.”

.@TPRgovuk Chief Executive, Lesley Titcomb on our joint pensions strategy

— FCA (@TheFCA) October 18, 2018

TPR chief executive Lesley Titcomb said: “Through our new approach we can together address earlier any issues that threaten the retirement outcomes for pension savers.”