It’s refreshing to be at a conference dedicated entirely to the customer journey. It can be all too easy for us in the industry – particularly us regulators who don’t interact with savers on a daily basis – to get caught up in our own plans and challenges.
So thank you to the ABI for creating this event and thank you for inviting The Pensions Regulator (TPR) to be a part of it.
The customer journey is in fact very much on our minds in Brighton.
We have a new CEO, Charles Counsell. Many of you will know that Charles was the Executive Director of Automatic Enrolment before he moved on to become the CEO of the Money Advice Service (MAS). The automatic enrolment customer journey was meticulously designed and executed and was a key element of the programme’s overall success.
So when Charles walked in for his first day as CEO of TPR we weren’t surprised to hear him say he will be making savers a priority.
The customer’s journey is becoming an increasingly complex one.
They face complicated decisions. They have more freedom and choice available to them. They have an ever-shifting market and an array of products to try and make sense of.
That complexity extends to the regulatory landscape too where people move between different regulatory boundaries. In some cases, that means we regulators have to work together – for example the Financial Conduct Authority (FCA) and TPR on defined benefit (DB) to defined contribution (DC) transfers. In other cases, such as in the case of superfunds, we might have different perspectives or opinions. It’s a complicated set up and you can see how it could be easy for us to be subsumed into protocols, regulatory boundaries and regulatory arbitrage.
But we mustn’t let that happen – we need to stay focused on savers. Because savers don’t care about regulatory boundaries. They don’t care whether their pension is contract based or trust based. Many don’t even know or care whether their pension is DB or DC.
What they do care about is that their savings are protected and that their scheme is well run. They care whether their money is safe. They care about having access to clear information when they need to make difficult decisions about their money.
So the questions we should be asking ourselves are - how can we encourage the customer to save? How can we protect their retirement savings? How can we make sure they understand their options and make good decisions? And how can we create an environment where they believe and trust in the savings industry?
Consumer journey – joint FCA / TPR strategy
Part of our joint strategy with FCA relates to the consumer journey. We recognise that as regulators, we have a role to play in building confidence in pension saving. We know we must work together and have a complimentary approach.
We’re currently working to understand the behaviour and decision-making of savers across a range of ages and incomes as they interact with the pensions, decumulation products and associated services.
Our aim is to use this insight to identify areas where we could improve savers’ ability to take decisions which are in their best interests.
We’re expecting to share initial findings in the Autumn at which point we’ll gather views of a wider group of stakeholders, and we plan to share our conclusions and recommendations early next year.
Joint work with FCA and other bodies
Some providers – and this includes some of you – will find yourselves falling under the remit of both the FCA and TPR. So it’s important that we acknowledge where there are synergies and differences between the two regulators. Our new supervision approach takes account of these to provide a better service.
We work with the FCA to ensure that our approaches are aligned, and that the most appropriate action is taken to deal with any issues, particularly where there is a clear role for FCA regulated organisations in relation to trust based schemes; administrators or investment managers for example.
In fact, we are actively increasing liaison across a number of key functions: policy, communications, intelligence and strategic planning, which is improving the consistency of our information and messaging.
We also collaborate with the FCA where there are issues that cross both our regulated communities, for example on DB transfers and Value for Money (VfM). We’re aiming to ensure consistent approaches, while recognising that the issues are not identical.
We are working to help savers get good value by ensuring occupational schemes meet our standards on investment governance and the assessment of costs and charges. For example we have recently written to over 500 small and medium DC schemes asking to confirm they undertake the required regular review of default investment strategies.
I can report that FCA colleagues are making good progress in preparing their rules on the disclosure of costs and charges to members of contract-based workplace pension schemes. These will fall in line with rules already introduced by the Department for Work and Pensions (DWP) for occupational schemes.
Together we are starting to explore how to further develop common principles for assessing VfM that works for all types of scheme.
The situation with British Steel Pension Scheme brings into sharp relief how important it is to work together, not just with FCA but others. Whilst it’s a difficult situation, some real positives have come out of it. In March we produced a joint protocol with the PPF the Money and Pensions Service (MAPS) and the FCA so that we can work in a co-ordinated way to support members of pension schemes regarding transfers and schemes under pressure.
We also want to work with industry. We have a vision of a pensions landscape with fewer, better run schemes, and we believe that Insurers have a key role to play in that vision.
That’s why we’ve been speaking and consulting with many of you – we want your input into how to shape the future landscape, especially around orphan schemes, and barriers to consolidation, such as ‘with profits’ investments.
Pension dashboards are another potentially great tool to help savers to understand and get involved with their savings. Dashboards will play a key role in highlighting the benefits of workplace pensions, especially to those saving towards their later life for the first time thanks to automatic enrolment. Dashboards are another area where we must all collaborate if we want the project to succeed.
TPR will be working with the DWP, the FCA, MAPS and the delivery group to develop the framework that will maintain effective dashboards.
The DWP is currently exploring an appropriate legislative vehicle to require pension schemes to participate in the dashboards. TPR will have a role to play in regulating compliance with these new duties. We’ll also work with the DWP and the delivery group to support schemes as they prepare to participate.
Again – we must put savers first and foremost. Savers must be able to trust the data in front of them. So we are urging schemes to engage with the delivery group as it defines data standards this year, and to take action to improve their data.
We now ask schemes to report on these areas in their scheme return so we can fully understand where improvements need to be made and where we may need to take action.
We welcome the Government’s commitment that providers will be required to take part in the dashboard project. We’re sure that members of the industry will rise to the challenge by working with the Government and the regulators to deliver this important initiative.
FCA Intervention on investment pathways and retirement communications
I’ve been asked to mention how I expect the FCA’s interventions on investment pathways and retirement communications will map across to occupational schemes.
As the occupational DC master trust market has gained momentum and scale, we have seen much more focus being paid towards member options and outcomes.
Some of that has been driven by:
- a general industry response to Freedom and Choice and recognition that members may want to take their benefits in different forms
- a growing recognition that many members of DC schemes will never engage with their pension investments and will never want to make active investment choices. It is not unusual to see 90% of the members invested in the scheme default fund
- a general move to improve communication and engagement with members
- a degree of reputation management by some master trust DC providers, who want to limit the business reputation risk posed by members who make bad choices through inertia (and ignorance)
We have also seen similar behaviour amongst the larger Single Employer Trusts, where scale and scheme governance budgets enable more time to be allocated to strategic issues for the schemes and their membership.
The DC market is still fairly immature so as it develops we expect the range of analytic techniques, individual modelling tools, communication and behavioural strategies used to increase. We also expect best practice to develop in response to broader pension market experience (ie GPP, OPS).
That’s a quick overview of some of the work we are doing at TPR. As the pensions regulator, we don’t often communicate directly with the customer – however I hope I have shown we are very alert to the customer journey from the start of their saving life to the decumulation stage.
With automatic enrolment we now have over 10 million people newly saving for their retirement and we want them to be saving throughout their working lives. They will – as long as we can keep them engaged and confident in pensions.
We know that their retirement prospects are determined by the trust they have in pensions and their ability to make complex decisions about things they may not necessarily understand at the outset.
So it’s crucial that all of us here today play our part in helping them along that journey. That means we share ideas, we listen to each other, as we are doing here today, and we build trust in our industry together.