Tess Page: Clarity is needed for trust-based schemes to confidently make the most of targeted support
More work is needed in order for trust-based schemes to make the most of targeted support, the industry says.
The Financial Conduct Authority (FCA) consultation on proposed targeted support reforms for pensions as part of its Advice Guidance Boundary Review closed today (13 February).
The Association of Consulting Actuaries (ACA) said that – while it welcomed the consultation and "strongly supported" the creation of a framework that will enable more people to access advice or support, at an affordable price – it wanted clarity regarding how trust-based schemes could confidently make the most of targeted support.
ACA defined contribution (DC) committee chair Tess Page said: "We would like clarity regarding how trust-based schemes will be able to confidently make the most of targeted support, even if this is to refer further consideration of this matter to the Department for Work and Pensions and The Pensions Regulator."
Page added there was "no reason" why a provider of targeted support should not obtain information about a member in a trust-based scheme and about the scheme itself – but said consideration needed to be given as to how this would work in practice, especially where there is no existing link between the trust-based scheme and the provider.
She said it also needed to be borne in mind that targeted support would require an ongoing assessment of whether it is producing good outcomes.
Page explained: "Consideration will need to be given to introducing a framework that provides trustees with the necessary comfort that allows them to provide targeted support, or something equivalent."
The ACA added that, to be most helpful to individuals, and to provide a meaningful step-up in what is on offer currently, targeted support must offer elements of both guidance and a personal recommendation.
It said that, if the framework tilts cautiously towards more generic guidance, "the opportunity will be wasted".
The ACA also noted a significant number of people would still need to take personalised advice – noting it would be helpful for targeted support to direct individuals to such advice where a need is identified.
Wider pensions savings information needed
In its response, SPP said that, while it supported certain proposals – for instance around readymade solutions and the potential for reducing consumer harm – it also drew attention to potential issues with other elements of the proposed changes.
It said that while 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, it also called for greater clarity.
The SPP noted: "[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."
The organisation added it "did not believe that this initiative can succeed without firms having access to members' wider pensions savings information as a minimum" – noting it believed it would be a "retrograde step for providers to deal exclusively with the pension benefits that relate solely to them".
The SPP also highlighted member concerns around risk. Its consultation response said decisions concerning investments and life-changing sums of money could involve uncertain outcomes and unintended consequences (such as tax, or loss of investment returns), even where appropriate support has been provided – noting that providers would need clarity concerning how responsibility for complex decisions will be allocated between providers and consumers if they decide to offer targeted support.
SPP financial services regulation committee chair Amanda Cooke added: "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."
The financial adviser viewpoint
The Personal Investment Management & Financial Advice Association (PIMFA) also had concerns – urging the FCA to ensure targeted support is sufficiently distinct from advice to preserve its appeal to consumers.
The trade body said while it backed targeted support, which would allow providers to help pension savers in a more meaningful way than at present, the attractiveness of mass-market financial advice must be preserved.
PIMFA argued while it was right that targeted support should be able to provide what is "currently tantamount to a personal recommendation, it cannot go so far as to confuse consumers about the type of service they are receiving or diminish the attractiveness of financial advice".
PIMFA head of public affairs Simon Harrington said: "Targeted support can be genuinely transformational. There is a very obvious support gap which exists in the pensions space in particular which we think targeted support can fill assuming – and it is a big assumption - that consumers are willing to engage with it.
"But we remain somewhat frustrated with the focus of the FCA's proposals, given that they appear to see the primary utility of targeted support as a method to help consumers buy different products rather than as a method to help them get better outcomes out of the ones they already own.
"By making targeted support transactional it risks blurring the boundary between advice and the new regime in an unhelpful manner."
He added: "We are comfortable with targeted support being able to provide what is currently tantamount to a personal recommendation, and we are comfortable with it being transactional, but the focus of the suggestions provided need to be focused on what a consumer could do, rather than being presented as something which they should do.
"As it brings forward its rules at the next stage, we have encouraged the FCA to think about how they can adequately delineate targeted support from financial advice."
Royal London director of policy Jamie Jenkins, however, said there was much to cheer about targeted support and it was not going to compete with advisers.
He said: "Targeted support isn't advice, nor is it intended to compete with the services of an adviser. If anything, it should complement the need for advice, perhaps as part of a continuum of people's engagement as they build their financial resilience.
"It should be free at the point of access, and centred around providing constructive help, rather than the current approach of simply warning people about the consequences of all the poor decisions they could make. It should help people make good decisions and its success should be measured on the value it provides in doing so.
"Any firm planning to measure the success of targeted support on the volume of product sales has missed the point, and perhaps misunderstood the essence of the Consumer Duty."
