According to the regulator, only a third (32%) of savers considered fees and charges when choosing a new provider, just one in five (21%) looked at investment options, and shockingly, only 7% thought about whether they might be giving up valuable guarantees. The FCA is right to be scrutinising the pensions transfer market.
“It’s a symptom of a wider issue. 90% of DC pension holders told the FCA it’s important to know what they’re being charged. Yet still, almost a quarter (23%) don’t know where to find that information. The system is failing them – especially where long-term outcomes depend so heavily on the details.
“Our own research shows the size of the problem. We found misinformed transfers could cost savers up to 20% of their retirement pot, which is a staggering £1.2 billion lost each year across the UK DC market. Too many are making one of the biggest financial choices of their lives with little or no real insight. We also found through research with the Behavioural Insights Team, that incentives like free cash offers can distort savers’ choices, leading them to prioritise short-term gains over long-term value. If we're serious about improving outcomes, we need reforms that put transparency and comparability at the heart of the process.
“There are obvious conclusions to this report: providers must do more to help savers find and understand the crucial information about their pension when they need it. We’ve long been calling for simple, accessible data on performance and charges, a ban on misleading incentives on pension transfers, and a mandatory requirement to compare schemes before a transfer goes ahead. If the FCA is serious about protecting consumers, these reforms should be the next step - because without urgent action, too many people will be left short in retirement.”
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