Aegon UK calls for FCA to defer proposals on non-advised DC consolidation till 2030

In its response to the FCA consultation, CP25/39 – Adapting our requirements for a changing pensions market, Aegon UK has argued that while FCA intentions are good, the proposed major interventions around non-advised DC consolidation should be put on hold pending roll-out of wider Government pensions consolidation initiatives.  

Steven Cameron, Pensions Director at Aegon, said: 

“The FCA is proposing a major change to the process around consolidating defined contribution contract-based pensions. We support the policy intent of ensuring members are protected from losing out, but with so many other major changes underway across the pensions market, now is just not the right time for the proposed changes. 

“Pensions consolidation into modern pensions can be very good for individuals – making it easier for people to manage their pension, supporting better engagement, simplifying investment and ‘at retirement’ decisions, and often leading to lower charges. But the proposals could inadvertently discourage some from consolidating just when the Government is pushing for widespread scheme and small pot consolidation, partly to benefit the UK economy.    

“For some pensions, consolidation is not in the individual’s interest, particularly if they’d lose valuable benefits. The consultation paper refers briefly to ‘trace and consolidate’ solutions but doesn’t factor in how using such tools can support customers. Services from the likes of Raindrop and Pension Lab offer a powerful means of reducing or eliminating one of the key risks by identifying arrangements with valuable features and helping RAG rate them to stop or discourage such transfers. Rather than create a whole new approach, the FCA could require all consolidating firms to use such tools or their equivalent as part of Consumer Duty. 

“The extensive data the FCA proposes risks overwhelming individuals and could lead to many giving up on beneficial consolidation. Millions of people have multiple pensions and will struggle to compare receiving and ceding pensions across 20 suggested aspects, some of which may be of little relevance to the individual’s circumstances. 

“With the industry already facing an unprecedented volume of pension changes, we’re calling on the FCA to put these proposals on hold until 2030. By then, the Pension Schemes Bill will have led to significant scheme-level consolidation across the workplace DC market, into mega funds, with the Value for Money Framework ensuring remaining schemes offer good value. Pension dashboards will also be live, providing easy access to much of the information involved in the comparisons proposed here. 

“Deferring will also provide time to explore industry-wide infrastructure solutions, and for the FCA to ensure the DWP will apply equivalent changes to trust-based pensions. Implementing just for contract-based pensions would be bizarre and very unhelpful to individuals.”