I haven’t got the time to do justice to the FCA’s latest review – indeed I had trouble  finding it – thanks to Sahil Sethi for sending me this link!

When in doubt – get Jo out!

“In Cumbo we trust” and for those not following her on twitter, here is her summary (with a few expostulations from me)

The FCA has today published its annual analysis of the changing landscape for financial products including pensions.

Key findings to follow:

1/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

This is of course an important document, the FCA should be thought leaders- helping to set the debate on how things are and should be changing.

The prospect that consumers may lack an income in retirement that is adequate or, at least, in line with their expectations remains the “central challenge” for the pensions sector – said the FCA.

2/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

Eye on the ball, what is happening is a shift from a pensions culture to a savings culture, people are being nudged into saving with no idea of the consequences. As one senior NEST employee told a DG conference on Wednesday, people saving into the Government pension scheme expect a Government pension. Eye on the ball!

– Workplace pension membership recorded another strong year of growth in 2017, driven by Master Trusts where memberships grew by 2.8 million in the year.

– BUT overall pension contribution rates in the market continued to be low, at less than 6%

3/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

We grossly over estimate the value of our workplace savings and underestimate the power of the state. Especially for lower-earners, the rises in the single state pension are of more value than contributions into workplace pensions,

– 3 of the biggest pension providers, with over half of the 9.3m savers with “lifestyled” pensions, announced design updates to align
legacy products more closely with “pension freedom” retirement choices

4/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

This “pensions triage is nothing more than window dressing. Preparing people for a decision they have yet to make is second guessing, we need a default position for those wishing to get their money back which doesn’t involve cashing pensions out, buying annuities or entering into unadvised drawdown.

– Since the start of 2016, 32 firms have chosen to stop providing
pension transfer advice or have decided to limit their pension transfer activity – after FCA intervention

7/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

Whatever the numbers, the key finding from the FCA is that more than half of these transfers shouldn’t have happened, the FCA has the remedy at hand to control the flow so that only those paying up front for advice get the opportunity to swap pension for a cash equivalent.

– The number of savers fully cashing in their pensions rose by 6% in 2017

– Around 55% took full cash withdrawals, 30% took drawdown, and 10-15%
chose an annuity

– Of the 55% cashing in their pensions, around half shifted the cash to ISA investments or to a back account

5/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

The consequences of moving from a pensions to a savings culture will be felt for generations ahead, the amount of money purchasing pensions seems to be falling.

– “The prospect of poor value non-workplace pensions is an
emerging area of concern said the FCA

8/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

The FCA should be asking themselves how much of the £36.8bn that came out of DB in 2017 found its way into workplace pensions and why the vast majority transferred to non-workplace products. It’s not just an advisory issue, workplace pensions aren’t generally seen as suitable – why not

– Since the start of 2016, 32 firms have chosen to stop providing
pension transfer advice or have decided to limit their pension transfer activity – after FCA intervention

7/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

You have to admire the FCA’s tact!

Jo goes on to note omissions.

– Since the start of 2016, 32 firms have chosen to stop providing
pension transfer advice or have decided to limit their pension transfer activity – after FCA intervention

7/

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

and the continued ducking of the issue of hidden charges in (principally in actively managed workplace pensions).

FCA report also says the workplace pension 0.75% charge cap “continues to ensure low costs in workplace pensions”

The report does not mention the cap does not cover hidden transaction costs.

People do not know everything they are paying for.

10/10

— Josephine Cumbo (@JosephineCumbo) January 10, 2019

To which I would add “no mention of the policy initiatives flagged as featuring in the white paper – the pensions dashboard and collective defined contribution pensions.

The changing pension landscape depends on good regulation. We have a regulator – in the FCA – that shows confidence but an occasional lack of agility.

By your fruits, will ye be judged, let’s hope that 2019 is a year when we start thinking about pensions as a wage in retirement and not a sub-set of wealth management