The pensions industry is calling on the government to ensure the Financial Conduct Authority’s proposed improvements to defined contribution transfers apply to trust-based schemes or create uneven protections for savers that could put millions at risk.

An FCA consultation titled, ‘Adapting our requirements for a changing pensions market’, is closing on Thursday. As well as making changes around online modellers, the regulator is proposing “a new process to support non-advised consumers to make informed decisions about whether and where to transfer or consolidate DC pensions”. 

This would mean that firms cannot offer to make a DC transfer until the consumer has been presented with “the minimum necessary information” to compare the receiving and ceding schemes. Under the proposals, the receiving scheme would need to gather information from the ceding scheme to allow this comparison.  

Industry association Pensions UK has welcomed the proposals but has warned they will fall short without alignment across contract-based and trust-based pensions regulation. It noted that “a significant proportion of pension transfers” are from trust-based DC schemes to FCA-regulated products, including self-invested personal pensions, saying these are the areas of greatest risk for consumers.

“Savers must be properly supported with increasingly complex decision-making at retirement, and these proposals are a strong first step. But for these reforms to achieve their intended consumer benefits, regulators must work together on a coherent whole market framework. Without alignment, savers will continue to face uneven protections and a fragmented journey at a time when clarity and confidence matter most,” said the association’s new head of DC, Philip Brown.  

Pensions UK said the Department for Work and Pensions and the Pensions Regulator should develop parallel proposals to the FCA’s, to ensure consistency, reduce market complexity and protect all savers.

The association also wants to see an explicit ban on cash and other transfer incentives, arguing that the Consumer Duty alone will not sufficiently protect savers, and requires stronger enforcement.

The FCA’s proposals overlap with other reforms in the DC space, said Pensions UK, citing value for money rules, small pots consolidation and pensions dashboards. It warned that a lack of alignment could mean providers risk duplicated effort, inconsistent messaging and increased costs that could have unintended consequences for the push to consolidate small pots.

Others have raised similar concerns. TISA has also urged the FCA to work with DWP to ensure its proposed changes to pension transfer rules are consistent across regulatory regimes and tested with consumers before final rules are considered.

Renny Biggins, head of policy, products and long-term savings, said TISA supports the aim of the proposals to improve consumer outcomes but said changes need to be mirrored by DWP and implemented simultaneously. 

“This is a prime example of the issues that exist [with] having two regulatory regimes spanning across DC workplace pensions,” he said. 

He added that the reforms must not cause disproportionate delays to transfers.  

The People’s Partnership, provider of the second-largest DC master trust, said the “partial” reforms are a step in the right direction but would leave millions of savers with weaker protections, and agreed action should be taken to address practices such as the use of incentives.  

Chief executive Patrick Heath-Lay said: “We are calling on the DWP to act quickly and introduce regulations at the same time as those that the FCA is proposing for contract-based pension schemes.”  

Heath-Lay argued that the average person does not know the difference between contract-based and trust-based DC, or between retail and workplace pensions. 

He added: “We believe the proposals could be strengthened further by including an outright ban on incentives, which have no place in pension transfer decisions.”

Provider Aegon UK has even said the FCA’s proposals should be put on hold while wider DC reforms are being rolled out. 

“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,” said pensions director Steven Cameron. 

“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,” he said. 

Cameron argued that by then, the pension schemes bill will have led to significant scheme-level consolidation across the workplace DC market, with the value for money framework in place and pension dashboards being live.

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,” he said.