How differences of opinion between the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) on retirement risk warnings impact trustees

What has happened?

In a matter of days, individuals aged 55 and over paying into a defined contribution scheme will have the option to draw down on their savings. In January, the FCA said pension providers should issue “risk warnings” tailored to an individual’s circumstances ahead of the changes, to ensure consumers make well-informed decisions.


The FCA published rules on retirement risk warnings at the end of February. These said providers should highlight factors such as the state of a consumer’s health, tax implications, the impact on means-tested benefits, and investment scams. “Providers of contract-based DC schemes will need to ask specific questions of savers wanting to take their benefits and provide risk warnings where necessary,” says Simon Tyler, legal director in the pensions department at law firm Pinsent Masons.

It will be a struggle to put in place processes to do this in the short period of time available”

The timing of the FCA’s announcement has irked industry commentators, who say schemes have little time to carry out a considerable administrative burden.

“It will be a struggle to put in place processes to do this in the short period of time available,” says Tyler. “The regulator coming out with rules so late in the day makes it very difficult for providers, schemes and insurance companies to actually plan and make the necessary changes to their processes and systems to be ready for 6 April,” says Darren Philp, head of policy at B&CE, provider of auto-enrolment scheme The People’s Pension.

What does this mean for trustees?

TPR emphasises a different approach. In its draft guide to pension flexibilities, trustees are encouraged to provide generic risk warnings to scheme members. TPR says trustees must direct members to Pension Wise, the government’s independent service to help savers understand their options, at least four months before their retirement date.

TPR also gives suggested wording for generic risk warnings. The FCA however urges trustees to develop their own wording, based on individual’s intention and degree of understanding of risk, rather than sending them a raft of generic information. This is known as the ‘second line of defence’.

How might the regulatory approach change?

The FCA plans to consult this summer on “whether to retain, modify or add to these rules”. Huw Evans, director general of the ABI, says the proposed review later in the year will be important to ensure the rules are working well in practice. TPR’s final guide will not be published until after 6 April.

There are two regulators regulating very similar products for very similar consumers”

This difference in approach has revived debate about whether it makes sense to split regulations between two bodies. “There are two regulators regulating very similar products for very similar consumers, but there are different protections for both,” says Philp. “We need to have more joined up policymaking to ensure no matter what pension scheme you’re saving in, you get the appropriate level of protections and avoid confusing messages and a confusing regulatory landscape.”