Regulators urged to collaborate on DC transfer rules

The regulator’s consultation on digital pension planning tools and transfer rules closes this week (12 February), with the FCA proposing a new ruleset for online tools and processes for non-advised customers when considering transfers.

While respondents commenting this week were broadly supportive of the FCA’s intentions, several warned of increased costs and complexity if the plans are implemented as proposed – particularly given the fragmented nature of DC regulation.

Several commentators warned that, as the FCA only regulates contract-based pension arrangements, careful consideration was required when applying rules to trust-based schemes.

“Changes must be implemented across the board simultaneously to avoid members receiving inconsistent outcomes and disjointed journeys between regulatory regimes.”

Renny Biggins, TISA

Joined-up thinking needed

The Society of Pension Professionals (SPP) said in its response that many FCA-regulated personal and stakeholder pension schemes were unlikely to hold significant benefits that would be lost on transfer, which is one of the main reasons for introducing safeguards. It called for the Department for Work and Pensions (DWP) to ensure equivalent rules are in place for the trust-based market.

Renny Biggins, head of policy for products and long-term savings at The Investment and Savings Alliance, echoed the SPP’s concern: “Changes must be mirrored by DWP and implemented across the board simultaneously to avoid members receiving inconsistent outcomes and disjointed journeys between regulatory regimes. This is a prime example of the issues that exist [with] two regulatory regimes spanning across DC workplace pensions.”

In addition, trade body Pensions UK highlighted overlap with other developments such as the Value for Money framework, and the small pots consolidation proposal, both of which are part of the Pension Schemes Bill. There was also overlap with the ongoing work on pensions dashboards.

In a statement, Pensions UK said: “Without alignment, providers risk duplicated effort, inconsistent messaging and increased costs that could have unintended consequences for the push to consolidate small pots. Continuous user testing remains essential to ensure comparisons remain intuitive and genuinely informative.”

‘A strong first step’

Philip Brown, newly-appointed head of DC at Pensions UK, added: “Savers must be properly supported with increasingly complex decision-making at retirement, and these proposals are a strong first step.

“Without [regulatory] alignment, savers will continue to face uneven protections and a fragmented journey at a time when clarity and confidence matter most.”

Philip Brown, Pensions UK

“But for these reforms to achieve their intended consumer benefits, regulators must work together on a coherent whole market framework. Without alignment, savers will continue to face uneven protections and a fragmented journey at a time when clarity and confidence matter most.”

Jon Greer, head of retirement policy at Quilter, said: “If the proposals do go ahead, it will be vital to ensure consistency across trust‑based and contract‑based schemes, working closely with the DWP to avoid regulatory gaps.

“And to make the whole regime workable at scale, the development of standardised data and APIs will be essential. Without a digital solution, firms simply won’t be able to deliver this efficiently or at the volume required.”

Delay implementation until 2030, says Aegon

Steven Cameron, pensions director at Aegon, went further and argued that “now is just not the right time for the proposed changes”, given the other major reforms being implemented.

He called for the regulator to delay implementing its proposals until 2030 to allow the VfM measures to be bedded in and for pensions dashboards to be rolled out to consumers.

In addition, Cameron warned that the level of data that the FCA proposes to present to DC customers “risks overwhelming individuals and could lead to many giving up on beneficial consolidation”.

“Millions of people have multiple pensions and will struggle to compare receiving and ceding pensions across 20 suggested aspects, some of which may be of little relevance to the individual’s circumstances,” he said.

SPP: Consistency and implementation crucial

Meanwhile, the SPP supported the consultation’s proposal for a regulatory regime for planning tools, including its recommendations on stochastic modelling, record keeping, regular reviews, and the triggers for applying non-advised transfer rules, describing them as proportionate and reasonable.

However, the industry body also urged the regulator to introduce clearer guidance or guardrails around growth assumptions used in pension projections. It said future projections should either be grounded in long-term expected market returns or clearly benchmarked against them, to reduce the risk of overly optimistic assumptions misleading savers.

“Regulators must be wary of adding additional costs and complexity to this process, especially at a time when schemes are dealing with a wide range of other regulatory and legislative changes.”

David James, Society of Pension Professionals

The organisation emphasised that figures presented to consumers must be useful and comparable across providers if digital tools are to genuinely support informed decision-making. Without greater consistency, the SPP warned, consumers could be confused when comparing outcomes from different models.

The SPP also raised concerns about the FCA’s ambitious 12-month timeline for implementation, given the need for consumer testing, system development and changes to user experience.

David James, chair of the SPP’s DC committee, said: “Like the FCA, the SPP would very much like to see a pension market that helps consumers navigate their financial lives, where pensions deliver value for money and consumers have the ability to make informed decisions.

“However, regulators must be wary of adding additional costs and complexity to this process, especially at a time when schemes are dealing with a wide range of other regulatory and legislative changes.”