The Financial Conduct Authority (FCA) has made a number of recommendations to encourage more people to seek guidance from Pension Wise.
The regulator today published the findings of a review into how well firms were signposting retiring customers to the government-backed free retirement guidance service, and dealing with pension scams.
Generally the FCA’s findings paint a positive picture of how firms are pointing customers towards Pension Wise.
A number of firms had tested their communications about Pension Wise to fit the needs of their customers. One firm provided its staff involved in developing retirement-related communications with some training on behavioural economics.
Other firms also signposted pensions guidance early on in the wake-up pack, providing full contact details upfront. Examples of making mention of Pension Wise prominent in documentation was also praised and a minority of firms has used annual pension statements to flag the existence of the service.
However, it also made a number of recommendations for improvement to ensure people know how to access guidance on their pension savings. It highlighted he following concerns:
- Some firms did not always highlight to their customers the different ways in which Pension Wise could be accessed.
- Some firms used inconsistent terminology such as ‘guidance guarantee’ as opposed to Pension Wise.
- A minority of firms presented their own or a partner’s guidance offering in a more prominent manner in written communications in comparison to the signpost to Pension Wise.
- Some firms’ written communications provided only a partial signpost upfront, requiring the customer to then look elsewhere in the documentation received to obtain complete detailst
The findings are interesting to compare with comments made by pensions minister Ros Altmann, who was highly critical of examples she said she had seen where providers failed to do enough to drive people to Pension Wise.
The study also looked at firms’ approach to pension scams, and what lengths had been taken to educate customers.
The FCA said examples of good practice included firms sharing information with their peer group, raising customer awareness of scams throughout the retirement journey and using structured processes to keep staff up to date on new types of fraud.
One key area the FCA found firms had performed ‘inadequately’ on the whole was oversight activity and collating management information (MI).
It found firms were failing to use MI to help monitor trends and make improvements in relation to signposting pensions guidance.
A number of firms had also not performed any compliance oversight activity relating to the ‘second line of defence’ across all their channels of communications to provide assurance that they were signposting effectively.
The second line of defence rules require providers to highlight to savers the existence of the guidance guarantee service, known as Pension Wise, or regulated advice.
Providers are required to give relevant risk warnings, such as warning of the tax implications of clients’ decisions, in response to answers from consumers.
The FCA added that a ‘significant number of firms’ did not appear to be collecting any MI in relation to signposting pensions guidance beyond that provided to the FCA in its Retirement Income Market data publication.