FS19/5: Effective competition in non-workplace pensions

Read FS19/5 (PDF)[2]

Annexes to the feedback statement:

• Annex 1: Feedback summary[3]
• Annex 2: Data[4]
• Annex 3: Charge level and variation[5]

Consumer research:

• NMG Consulting: Non-workplace pensions consumer engagement[6]

Our findings

We found that a lack of consumer engagement, combined with complex and confusing products and charges, has led to a lack of competitive pressure in the non-workplace pensions market – covering £470bn of retirement savings.

Charges are too complex for consumers to be able to compare. Similar customers can pay very different charges – those paying the highest could be losing tens of thousands from their pension over their working life.

This paper outlines, and seeks feedback on, a package of potential measures to:

• protect consumers who do not or cannot engage with their investment decision
• reduce charge complexity
• promote charge transparency
• consider ways in which charges can be opened up to external scrutiny 

Who this applies to

This paper raises questions for firms who operate, and consumers who participate in:

• personal pensions
• stakeholder personal pensions
• self-invested personal pensions

It may also be of interest to other participants in the pensions value chain including:

• providers of advice and guidance
• investment platforms
• asset managers
• discretionary fund managers

Background to our work on non-workplace pensions

Many people in the UK use private, non-workplace pensions (NWP) to save for their retirement. Ensuring this market works well is an important part of our joint strategy with The Pensions Regulator (TPR). Two key parts of this strategy are to ensure that consumers can make informed decisions and that the pension products they use deliver value for money. Competition between pension providers can be an important driver of value for consumers. 

In 2018 we published a Discussion Paper (DP) 18/1[7] on effective competition in non-workplace pensions. DP18/1 marked the start of our exploration of:  ​​​​

• whether the NWP market has the same weaknesses the OFT identified in the DC workplace pension market in 2013: demand-side weaknesses and reduced competition on charges
• the differences and similarities between these two markets

Next steps

We aim to issue a consultation paper (CP) in Q2 2021, including a Cost Benefit Analysis for any changes to rules or guidance.