TISA urges FCA to test pension transfer rule changes

The Investing and Saving Alliance has urged the Financial Conduct Authority to conduct consumer testing on proposed changes to pension transfer rules and to align its approach with the Department for Work and Pensions' approach to defined contribution workplace pensions.

TISA warned that the FCA's consultation on adapting requirements for a changing pensions market could add time and operational friction to transfers. It said measures that lengthen transfer times should be tested with consumers before regulators finalise the rules.

It also called on the FCA and DWP to coordinate their rulebooks, warning that members could face different processes and outcomes depending on whether they hold a contract-based pension under FCA rules or a trust-based occupational scheme under DWP legislation.

"While we support the aim of these proposals to improve consumer outcomes, any change that risks adding material delay to transfers must be backed by robust consumer testing to ensure any benefits derived are proportionate to the significant time and operational burden involved," said Renny Biggins, Head of Policy: Products & Long-Term Savings at TISA.

Biggins said the changes could add about two weeks to transfer timelines, and that testing should show the delay is justified by better outcomes.

"Changes must also be mirrored by DWP and implemented across the board simultaneously to avoid members receiving inconsistent outcomes and disjointed journeys between regulatory regimes. This is a prime example of the issues that exist having two regulatory regimes spanning across DC workplace pensions," Biggins added.

Transfer alignment

The intervention highlights a longstanding tension in UK pensions supervision. The FCA regulates personal pensions and contract-based workplace schemes. The Pensions Regulator oversees many occupational schemes, while the DWP sets legislation for occupational pensions. Providers, administrators and employers often operate across both structures.

TISA's response focuses on transfer processes. It said the FCA's proposed changes should be mirrored in occupational scheme rules and implemented simultaneously across regimes. This, it argued, would reduce the risk of consumers facing different requirements depending on where their savings sit.

TISA did not set out alternative transfer rules. Instead, it focused on process and consistency, and on the consumer impact of delays. It framed its position around proportionality, operational burden and member experience.

Projection assumptions

TISA also raised concerns about how retirement projections and modelling tools present outcomes. It said consumers already receive projections in annual statements and will receive estimated retirement income figures through pensions dashboards. It warned that differences in assumptions could produce very different numbers for the same saver.

It said growth rates and decumulation scenarios in online modelling should align with assumptions used in the Statutory Money Purchase Illustration. SMPI assumptions already apply to annual statements and underpin retirement income estimates for pensions dashboards.

TISA recommended that the FCA base simulation decumulation scenarios and assumed growth rates on standard SMPI assumptions to reduce confusion and the risk of disengagement.

Modelling concerns

TISA also warned that online modelling tools could be misinterpreted, particularly by people nearing retirement. It said some proposed approaches could be perceived as tailored guidance rather than scenario modelling.

"We also have concerns that the proposals for online modelling simulations go beyond their intended purpose by providing a personalised decumulation solution which could be perceived as a personal recommendation by those close to retirement and discourage consumers from using them to scenario plan," Biggins said.

TISA linked the issue to trust and comprehension, warning that inconsistent assumptions across dashboards, statements and modelling tools could undermine confidence in pensions information and leave consumers unsure which figures to rely on.

"More generally, we already have assumption requirements for SMPI which members receive annually and will also be used for pension dashboard when providing an estimated retirement income. We strongly recommend the assumptions for both decumulation and growth are aligned to these requirements so members are not receiving wildly different figures, which would only serve to confuse, create disengagement and add to distrust in the framework," Biggins said.

TISA is a not-for-profit membership organisation with about 270 member firms across savings, investments and pensions distribution, including banks, insurers, platforms, pension providers, administrators and advisers. The FCA consultation remains open as the regulator considers changes to pensions rules amid wider market shifts and the rollout of pensions dashboards.