The Financial Conduct Authority and The Pensions Regulator have revealed plans on how they will work together over the next decade, in a bid to tackle low levels of retirement saving.
A document released yesterday, 19 March 2018, outlined how the two regulatory authorities have been “working jointly” on their pension strategies to tackle the risks facing the industry and have asked for input from key stakeholders.
Despite having two separate remits, the document said they will work on factors affecting accumulation and decumulation phases such as scams, the Work and Pensions Committee’s pension freedoms inquiry, the auto-enrolment review and the defined benefit white paper.
Broadly, The FCA’s remit focuses on “ensuring the appropriate number of consumer protection and competition”, while TPR helps to drive up standards of scheme governance, including scheme's management of fund risk and ensuring their staff are automatically enrolled.
Just Group communications director, Stephen Lowe, said: “It’s essential that TPR and the FCA continue working closely together to identify and mitigate risks that are preventing pension savers from getting good value. One area they recognise is in need of scrutiny is the need to support good choices and outcomes at retirement.
“At the moment government policy is strong on encouraging pension saving but weak on ensuring savers take the guidance available to help them decide how best to use the money.”
In the document the pair outline the challenges for members in the accumulation phase and the decumulation phase, with a particular focus on an inadequate level of income in retirement.
They document said: “While there is a clear role for both the FCA and TPR, we also recognise that this harm is affected by several factors that we cannot tackle alone, for example, the level of consumer confidence in pensions, the level of real interest rates and levels of retirement saving. We must keep working with other regulators and the government to protect customers.”
Lowe suggests that default guidance must be introduced in order to create “a far more robust framework” in the decumulation process.
He added: “Our view is that default guidance should be introduced as part of the Financial Guidance and Claims Bill because currently regulators are effectively working with one hand tied behind their back.
“This bill is a chance for government to send a clear instruction to regulators.
“It’s clear the current rules aren’t having the desired effect in encouraging take-up of guidance or advice. As Michelle Cracknell recently told MPs on the Treasury Select Committee: ‘A nudge is not sufficient – there needs to be an intervention such as a mid-life MOT or default guidance’.”
The pair said they will now work closely with stakeholders to understand the biggest current and potential risk facing the industry and that it will publish their final strategic approach later this year.
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