FCA director of long-term savings and pensions Nick Poyntz-Wright says the regulator is unlikely to impose specific standards on pension providers’ at-retirement communications following its review of the annuity market.
Poyntz-Wright’s comments, which follow the publication of the regulator’s annuities review last month, will be a blow to campaigners who want to see a simple “pensions passport” introduced for people who are approaching retirement.
Speaking to Money Marketing, Poyntz-Wright says: “Providers, often with the very best of intentions, are keen to understand exactly what it is they have to do to deliver something that is good.
“There are dangers with that because if we go too far with prescription, first of all you have to spend a lot of time keeping that up to date and secondly, that is unlikely to be the only way to deliver a good result.
“We have got very important principles, which are that the information should be clear, fair and not misleading. What we are seeing is that it is not necessarily all about the amount of information that is being provided, it is also about how it is received.”
Code of conduct
The former Skandia chief executive also suggests that the Association of British Insurers’ retirement choices code of conduct – which is designed to boost the number of people who shop around for a pension product – is unlikely to be sufficient to address the FCA’s concerns about the retirement market.
“The ABI has introduced a code and as a result the mat-erials being shared with customers are different and more extensive,” he says.
“I suppose one of the things we are identifying in this review is that more does not necessarily mean better.
“Looking at the consumer research, it is clear that people are too easily disillusioned as they search for the right outcome. Sometimes lots of information, lots of complexity and lots of choices – which people are not familiar with because this is a once-in-a-lifetime situation – is quite off-putting.”
The regulator’s 12-month annuity market study revealed that 80 per cent of people who do not shop around for at-retirement products would have got a better deal if they had. It also found that providers expect to make more money from existing customers than from new customers, raising concerns that they may be incentivised to discourage people from switching.
As a result, the FCA will conduct a 12-month investigation in an effort to discover why people who could get a better deal elsewhere choose to stay with their existing provider.
“We are focusing on the consumer angle and asking what it is like for a customer at the point of retirement and what is making them become disillusioned and not shop around,” Poyntz-Wright says.
“That is something we will look at in the market study. But it is not just about what the provider is doing or what the regulator is requiring the provider to do, it is about how that information is received and heard and acted upon.
“There must be a better way of getting people to engage but I don’t think we’ve found it yet. I doubt whether there is going to be one way to communicate with people that is going to be suitable.”
He adds: “We also need to think of different types and groups of consumers because different people will be in different circumstances and may receive those messages in different ways.”
Sales and retention practices
The regulator also intends to investigate providers’ sales and retention practices in a bid to discover whether savers are being discouraged from shopping around.
Poyntz-Wright says the FCA will pursue enforcement action against any firms it believes are not behaving in line with its rules and prin-ciples. He says: “There are rules and principles that we have had for some time that we expect providers to
adhere to so what we will be doing over the next 12 months is looking at sales and retention practices.
“If we find during that inves-tigation that they haven’t been compliant, we need to think about the regulatory action we will take.
“We do not know what we will find but there might be some instances that we need to highlight and deal with very quickly.”
Poyntz-Wright warns that firms which are complying with the FCA’s rules and principles may still be required to change their processes if customers persistently fail to shop around.
He says: “Meeting and complying with the rules and principles we have today may not be enough. The evidence we are seeing suggests it isn’t enough. It is a big cultural change for providers because the history of regulation has been prescriptive and we are now thinking that disclosure on its own is not enough.”
The FCA has also come under pressure to ban commission on non-advised sales after advisers raised concerns that an unlevel playing field had been created post-RDR.
Poyntz-Wright says: “We understand there is a concern [about commission continuing for non-advised sales]. The RDR has had a number of positive effects on the advised part of the market.
“What we have also seen is an increase in the amount of non-advised business and we are looking at that part of the market at the moment.
“I understand the concern about how visible it is to the customer that a commission is being paid. It absolutely should be visible and ultimately in the non-advised space the principles of being clear, fair and not misleading still apply.”
Nick Poyntz-Wright was speaking to Money Marketing following a live MMWired debate on annuity reform.
You can watch the debate on-demand at www.moneymarketing.co.uk/wired/