Amidst the noise of the ban on contingent charging, the FCA published a long and detailed Policy Statement PS20-06

For the most part, the FCA is concerned with people safeguarding their rights to promised benefits wherever they may come from. Obviously the vast majority of promised benefits come from occupational defined benefit schemes, but the FCA are also concerned about DC schemes. They go so far as to say on their website

There may be benefits to switching from one defined contribution scheme to another, but it depends on your individual circumstances and is a complex financial decision. So you should first get impartial advice from a firm authorised to give advice on pensions.

This is absolutely right. Out of prudence we should always act advisedly and manage conflicts by making sure that advice is from a firm authorized to give it and impartial in the advice it gives.

But to get authorized, impartial advice costs money, so that “should” needs to be qualified by a recognition that the cost of advice needs to be a consideration too. Indeed for many people the best course of action may be to transfer without paying for the cost of advice. Indeed  since the introduction of stakeholder pensions, the Government’s intention has been for pensions to be both portable and transferable without cost.

Here there is a dilemma for the FCA since , for most people, the main thing is to be able to retire on a mixture of pensions and pension savings , typically self-managing the process.

So while the FCA feel people “should” be taking advice, they also recognize that most people don’t take advice but still want a manageable income in retirement. Estimates vary but it’s generally thought that through a lifetime a saver will accumulate  9 pension  pots.  Many of these pots are so small in size that their transfer may barely meet the cost of advising on the transfer. Clearly this is not what the FCA means to happen.

So what is growing up in the UK is a new kind of pension provider which provides support to those wishing to consolidate lots of little pots into one big pot.

Pension Bee is the most famous of these consolidators. And at the same time , Fintechs , that might better be known as Pentechs are looking at way of making it easier for people to make these transfers. Examples are Zippen, MyFutureNow and AgeWage.

What is clear is that the full advisory requirements of PS20-06 make the consolidation work of both the providers and facilitators extremely hard.  To use a word much used by regulators , these rules are simply not proportionate to the needs of firms wishing to make introductions under restricted permissions. Nor are they proportionate to the needs of customers looking to transfer non-safeguarded benefits to a consolidating pot.

Testing the capacity of restricted advisory permissions

For AgeWage, which is expecting to enter the FCA Sandbox in a mater of weeks, the issues surrounding the transfer of DC pension pot to DC pension pot are extremely important.

They are also very important for those at MAPS considering how a pension dashboard will work. The stated aim of the pension dashboard is to allow people to see all their pension pots and pensions in one place and to make decisions about them.

The dashboard’s chosen route is to find pensions using technology which searches for and locates pension rights using our unique identifiers. The assumption is that what is found digitally can be assessed digitally and that any transactions that are needed to be made to move from pension pots to a retirement plan, can also be conducted digitally.

Here there is an important consideration. For the consolidation of up to 100 million pension pots into the retirement plans of the British saving public, we are not going to have anywhere like the capacity to ensure that everyone takes impartial authorized advice.

So AgeWage’s visit to the FCA’s sandbox is important , not just for AgeWage, but to people who are thinking  about how the dashboard is going to work, to pension consolidators like Pension Bee and to the FCA and TPR for whom the proliferation of pension pots is a compliance and policy disaster in the making.

PS20-06 addresses the past , we need now to look to the future

The FCA’s sandbox sits within the FCA’s Innovation Hub. While the Pension Dashboard is not being developed by the FCA, it is supposed that commercial pension dashboards will be authorized by the FCA.

While AgeWage cannot claim to be a pension dashboard, it sets out to answer some of the questions that the dashboard is hoping to address. Specifically it is looking to test whether consumers can be empowered to act on their pensions without self-harming and without necessarily taking advice.

AgeWage is pragmatic and know that the vast majority of consumers don’t follow the FCA’s edict and take advice when making later-life pension decisions. We must now consider how we can help those who choose not to take advice or haven’t the means to pay for it, to take informed decisions.

We can do so with greater confidence because of PS20-06 which draws a line in the sand. Moving forward we need to think of a fully integrated pension dashboard as the new normal – even though it might be five years away.