CP21/32: Improving outcomes in non-workplace pensions

Consultation opens
Consultation closed

We are asking for views on our proposed rules to improve outcomes for consumers saving into non-workplace pensions.

Read CP21/32

Why we are consulting 

We are consulting on measures to help consumers with non-workplace pensions build their pension savings for retirement.

Currently, consumers buying and saving into a non-workplace pension have to choose their own investments from an increasingly wide range of options. This complexity can make it hard for some consumers who do not take advice to choose investments that meet their retirement needs. They may end up with investments that are not appropriately diversified and with too much or too little risk. In addition, more consumers are now buying non-workplace pensions without advice.

As well as poorly chosen baskets of investments, we are concerned that some consumers hold cash in their non-workplace pension. Over the long term, cash holdings are at risk of being eroded by inflation. Investing in growth assets rather than cash is likely to deliver a larger pension pot at retirement.

What we are proposing 

We are proposing that non-workplace pension providers: 

  • Offer a 'default' investment option to new non-advised consumers 

A professionally designed investment strategy could deliver substantially better outcomes for those motivated enough to know that they need a pension, but who lack the experience or time to choose the right mix of investments.

  • Issue cash warnings to consumers with sustained and potentially inappropriate levels of cash in their non-workplace pension 

Cash warnings would show how cash savings are at risk of being eroded by inflation and prompt consumers to consider investing in other assets with the potential for growth (such as a default option, if available).

Who this applies to 

Our proposals will primarily be of interest to firms that operate non-workplace pensions, including:

  • life insurers 
  • platform providers 
  • self-invested personal pension operators 

Our proposals are also relevant to other stakeholders with an interest in non-workplace pensions, including: 

  • industry associations and trade bodies 
  • independent governance bodies 
  • asset management firms 
  • individuals and firms providing advice and information in this area 
  • consumer representative groups 
  • charities and other organisations with a particular interest in the ageing population 

Consumers will also be affected by this consultation. We welcome views from consumers on all our proposals. 

Background to our work on non-workplace pension 

Pensions markets are a priority area for the FCA. Our work on non-workplace pensions is part of our aim to improve outcomes across all types of pension products, working jointly with the Pensions Regulator (TPR). 

We published a Discussion Paper (DP 18/1) in 2018, seeking to understand better how well the non-workplace pensions market was working for consumers. A Feedback Statement (FS19/5) followed in 2019, revealing a lack of competitive pressure driven by low consumer engagement with complex and confusing products and charges.

In addition to this Consultation Paper, we are taking forward work to address concerns around the transparency of costs and charges. In September 2021, we published our joint Discussion Paper (DP21/3) with TPR on assessing value for money (VFM) across all defined contribution pension schemes, including non-workplace pensions. The paper set out possible metrics and benchmarks for assessing VFM in terms of investment performance, service, and costs and charges. 

Next steps 

This consultation has now closed. We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments.