The new single financial guidance body should prioritise informing consumers about the protection the Financial Services Compensation Scheme provides on pensions, the FCA says.
In a roundtable discussion today on pensions and choices for retirement income products, FCA strategy and competition director Christopher Woolard cited research published by the lifeboat fund in March.
The research showed people who are aware of the FSCS are less inclined to buy riskier products and more inclined to opt for those it protects.
Similarly, people who think the FSCS is important are also more likely to take advice and less likely to question the price of that advice.
Because of this, Woolard says the new single financial guidance body, which will be formed through the merger of the Money Advice Service, The Pensions Advisory Service and Pension Wise, should use its powers to raise the awareness of the FSCS among consumers because this will make them better off.
Woolard says: “The new single financial guidance body will have to work out the core messages it wants to convey to consumers. One of them should be the role the FSCS plays in the protection of consumers and how it can help them.
“This is a difficult communication challenge as people who receive advice on pensions are diverse and range from people with savings of between £20,000 and £30,000 at the lower end all the way up to hundreds of thousands at the other.”
Advisers also have a prominent role to play in the education process and helping consumers understand what the FSCS does, he adds.
Woolard says the growth in the size of savers’ pots in Australia had increased the engagement with pensions and a similar effect should happen in the UK from the growth of defined contribution plans.
Also speaking at the roundtable, FSCS chief executive Mark Neale says the lifeboat fund could learn from the Pension Protection Fund, which has a higher media profile.
While this is partially due to the media coverage of defined benefit scheme funding and transfers, the FSCS work is just as important, he adds.
In 2018 it expects to handle 7,000 pensions claims across DB and Sipps and expects to pay £150m in compensation.