The FCA has published a discussion paper seeking views on the market for non-workplace pensions so it can understand the sector better.
The document explains the regulator wants to know whether competition is working well and if there are issues that need to be addressed in order to protect consumers.
The FCA estimates that non-workplace pensions collectively represent around £400bn assets under management and this is more than double the amount invested in contract-based defined contribution workplace pension schemes.
Research also suggests at least one in four adults have accumulated benefits in non-workplace pensions and it is therefore important to grasp how the differences and similarities between the workplace and non-workplace markets shape competition and consumer outcomes.
FCA executive director of strategy and competition Christopher Woolard says: “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.
“A diverse group of people save into non-workplace pensions and it is a growing market. We want to hear from anyone with an interest in this subject about how they think the market is working.”
Areas of focus include product complexity, the factors which may reduce consumer ability to invest effort in decisions related to their pensions and whether customers can identify and freely move to more competitive products.
Responding to the paper Retirement Advantage pensions technical director Andrew Tully says “it seems a reasonable summary of the [non-workplace] market” and where advisers stand in relation to it.
He notes the FCA says that historically, the vast majority of non-workplace pensions were sold with regulated advice but over the last five to 10 years, the reliance on advice has declined, owing to technological developments supporting the rise of investment platforms.
Tully adds: “The paper says only 40 per cent of new sales to clients were advised in the last two years [according to FCA sales data]. This figure demonstrates the importance of advice and many people are not taking it.
“There is also quite a bit about consumers not understanding charges and that is down to the customers not understanding statutory money purchase illustrations. These are seen as too complicated, long and so the information should be expressed in pounds and pence as people understand that better.”
The FCA is seeking feedback by 27 April 2018, will consider responses and will then look to collect data to better understand any problems identified.
Non-workplace pensions include individual personal pensions, stakeholder personal pensions, self-invested personal pensions, free standing additional voluntary contributions, s32 buyouts, and retirement annuities.