SPP responds to FCA plans for “targeted support” for pensions

The Financial Conduct Authority (FCA) is currently consulting on how they can take forward a new type of support for consumers with their pensions, called “targeted support”, as part of their Advice Guidance Boundary Review.

The Society of Pension Professionals (SPP) have responded to this consultation, highlighting their support for certain proposals e.g. around readymade solutions and the potential for reducing consumer harm, whilst simultaneously drawing attention to potential issues with other elements of the proposed changes.

Although the SPP state the FCA’s proposals for targeted support could reduce harm to consumers if there is sufficiently widespread take-up among FCA-regulated firms, and the framework accommodates trustees of occupational pension schemes providing equivalent support, they have also called for greater clarity, noting that the consultation paper, “…does not give any indication as to whether, as part of a targeted support service, a firm is expected to take into account other pension arrangements from other providers when judging if a better outcome could be achieved or whether the customer would be expected to go through multiple targeted support processes for each product.”

Indeed, the SPP have highlighted that they do not believe that this initiative can succeed without firms having access to members’ wider pensions savings information as a minimum, stating, “…we believe it would be a retrograde step for providers to deal exclusively with the pension benefits that relate solely to them.”

In relation to fees and charges, the SPP explain, “…ultimately it will be up to firms to decide whether they are able to offer a targeted support service to customers free of charge or to charge an appropriate fee” going on to explain that, “much would depend on the final regulatory framework that is introduced, but large product providers are likely to seek to recover the costs of providing a targeted support service through some form of cross subsidisation.”

The SPP also highlight member concerns around risk. Their consultation response states; “Decisions concerning investments and life-changing sums of money can involve uncertain outcomes and unintended consequences (such as tax, or loss of investment returns), even where appropriate support has been provided. Consumers may also experience regret risk in relation to their decisions. Providers will need clarity concerning how responsibility for complex decisions will be allocated between providers and consumers if they decide to offer targeted support.” The SPP then warn that if, “…firms believe they are unable to put adequate controls in place to manage these risks, they may seek to mitigate their exposure by limiting their role to the minimum required (which will not involve providing targeted support).”

Amanda Cooke, Chair of the SPP’s Financial Services Regulation Committee, said; “There are some sensible and welcome proposals being put forward by the FCA to deal with ongoing issues relating to the advice/guidance boundary in relation to pensions. However, as is often the case, the devil really is in the detail. It’s important for industry and consumers that the FCA gets this right, especially in the context of other current workstreams focussed on retirement planning. We trust that our response will play a part in helping to improve these proposals if and when they are implemented.”