Trade bodies have called for greater detail on proposals to offer customers “targeted support” as the Financial Conduct Authority (FCA) seeks to bridge the advice gap.
Targeted support is designed to allow financial services providers to give guidance to specific groups of people based on their needs. While trust-based pension schemes are not directly covered by the FCA-led plans, the watchdog is working with the Pensions Regulator on extending coverage.
In its response to the consultation, which closes tomorrow (29 August), the Association of Professional Pension Trustees (APPT) voiced concerns that the regulations as drafted will be complex for trust-based pension schemes to implement.
APPT vice chair Vassos Vassou explained: “We anticipate that, since to undertake targeted support an entity needs to be authorised by the FCA, this will typically mean being a corporate.
“For master trusts, that could be done by trustees if they form a corporate entity but, given the scale of the task, they are likely to leave this to the scheme funder. For sole-employer defined contribution trusts, only the largest are likely to look at doing this.
“Regulations should enable trustees to subcontract targeted support to another party, since not providing this would disadvantage their members against those in trusts or master trusts that do.”
The APPT said the Financial Conduct Authority “should be mindful to be clear on implications for trustees but should seek to avoid these restricting communications that trustees can currently make”.
In the consultation paper, the FCA said it was working closely with the Pensions Regulator and would “consider if further clarity to trustees should be provided”.
SPP opposes exclusion of annuities from targeted support
Meanwhile, the APPT, the Association of British Insurers (ABI), and the Society of Pension Professionals (SPP) all argued in their responses to the consultation that changes were required around the treatment of annuities.
The FCA has said that existing rules allow firms to give “general guidance” on annuities, but it currently has no intention of bringing in additional rules through the targeted support regime.
The ABI and APPT both called for firms to be allowed to point customers towards annuity brokers.
“While it may not be appropriate for a targeted support model to recommend a particular type of annuity, there should be more scope within the final rules to help consumers where an annuity may be the most appropriate option for them.”
Society of Pension Professionals
The SPP added: “While it may not be appropriate for a targeted support model to recommend a particular type of annuity, there should be more scope within the final rules to help consumers where an annuity may be the most appropriate option for them.
“This would provide consumers who wish to consider an annuity with a better experience and provide them with a greater level of information, support and outcome than is received today.”
The society also opposed the exclusion of pension pot consolidation from targeted support, arguing that “consolidation may be an integral piece of any suggestion to achieve a better outcome”.
In addition, it said, excluding consolidation was “inconsistent with wider policy objectives to promote consolidation and encourage members to seek better value for money”.
Clarity and consistency ‘key’ to targeted support success
The ABI, meanwhile, said rules needed to be “clear and consistent” to give firms confidence around providing support to customers.
It also called for more clarity around how customers can be grouped, arguing that the FCA’s concerns about “overly individualised” segments “may stop firms from using more customer data even when doing so would lead to better outcomes”.
George Ritchie, long-term savings policy manager at the ABI, said targeted support was “a major leap forward” in providing financial services users with more information and supporting decision-making.
However, he said changes were still needed to “ensure that targeted support becomes the mass-market intervention envisaged by the FCA”.
“Clarity is key to give firms the necessary confidence to start offering this novel form of support to customers,” Ritchie added.
Regulatory collaboration needed to avoid confusion
All three organisations called for the FCA to be mindful of other regulatory developments to ensure they “fit harmoniously” with targeted support. It called for close co-operation between the FCA and the Pensions Regulator to ensure there was no regulatory confusion.
The APPT highlighted plans for “guided retirement” – the default decumulation services that will be legislated for in the Pension Schemes Bill.
“The direction of travel for the two is broadly the same but it will need attention to ensure they work together well,” the APPT said in a statement.
In addition, the ABI said the Information Commissioner’s Office guidance and rules around direct marketing communications needed to be updated to allow firms to send “ready-made suggestions” or other targeted support materials to customers.
