FCA warns pension firms over value offered by older pension products

Pension providers must do more to improve outcomes for customers in older pension products, after the Financial Conduct Authority (FCA) found some savers in legacy arrangements may be receiving poorer value than those in newer products.

The regulator’s review of unit-linked non-workplace pensions and savings products found that complex charging structures, outdated product designs and weaknesses in firms’ data were contributing to poorer value for some customers holding older policies that are no longer open to new business.

While the FCA identified examples of good practice across the market, it said firms should do more to ensure customers in closed books are not disadvantaged.

The regulator found some providers had already taken steps to improve outcomes, including reducing or capping charges for customers in legacy products, comparing outcomes across different groups of savers and moving customers into better-value alternatives.

Some firms were also simplifying or rationalising older products and funds to improve value.

However, the FCA said older charging structures and product designs could make it more difficult for customers to understand whether they were receiving good value, while gaps in firms’ data limited their ability to assess outcomes effectively.

The regulator is now encouraging all providers of unit-linked non-workplace pensions to review the findings and consider adopting the examples of good practice identified in the report.

It is also engaging with firms to understand the barriers to improving value within closed books.