Improving Retirement Market Disclosure - Smarter Retirement Communications

30 June 2015

Last week saw publication and promotion of a weighty Discussion Paper (DP) by FCA heavyweights Christopher Woolard, Director of Strategy and Competition and David Geale, Director of Policy. The two even had a nicely-produced video available to introduce the DP’s contents. There is a great deal in here which ranges across pensions, investment management and even general insurance markets. Naturally here at Dunstan Thomas we wanted to take a look at the areas affecting retirement market disclosure requirements more than others (although we have listed them all). The paper addresses 7 main areas where the FCA feels there is more work to do by providers.

1. Presentation of Terms & Conditions: The general feeling is that T&Cs tend to be too long, complicated and inaccessible. Many T&C documents are guilty of over disclosure with a view to covering providers’ backs from a legal perspective rather than communicating key elements of the document which consumers really ought to be aware of. As with all thing today a good animated video seems to be a recommended way to communicate key T&Cs without turning off the consumer. So as promises the FCA holds up one great example put together by Lloyds Banking Group.

2. Disclosure of fees and charges: Here the FCA looks in more detail at how behavioural economics lessons learnt in the retail banking world (see FCA OP-10) can be applied to pensions and investments world. One key tenet is to make information about charges available in an immediate way (by TXT for example) at the point of sale. The feeling is that such alerts would ensure people have a better understanding of what charges they are incurring and this might lead to better outcomes for them. Key concerns in this area revolve around the following concerns: -Resolving the issue of paying more than consumers expect to pay because of opaque nature of some costs -Ensuring appreciation of the full costs that a product or service can attract over its lifetime -Making it possible for consumers identify how costs described as fees and charges differ from each other in terms of operation and effect, if at all. -Deal with the problem of comparing costs of different providers.

Nutmeg is held up as an example of best practice in clear presentation of their fees, charges and their impact to the consumer’s bottom line.

3. Directing customer queries better: clearly providing contact details for queries about products and answering in a timely manner via a range of channels is key

4. Making sure consumers are aware of the FOS and FSCS and what protection these offer consumers

5. Encouraging consumer to claim redress: See The FCA’s Occasional Paper #2 on this

6. Disclosure improvement around investment advice: It is worth bearing in mind when reviewing your disclosure documentation that MIFID II needs to be implemented by 3rd January 2017. This requires disclosure of all costs and charges associated with financial instruments and investment management including transaction costs at point of sale and ongoing. It will also be necessary to clearly demarcate restricted from full advice if firms have not done so already

7. Simplification of Retirement Communications: Research that the FCA has commissioned showed that many consumers don’t understand standard terms that the retirement market bandies around all the time. A lack of financial understanding amongst consumers is a potential barrier to good consumer outcomes in the pensions and at-retirement market, inhibiting awareness and making it difficult for consumers to make informed decisions, the DP reports.

Part of the problem is that some terms are not used uniformly by all providers. The language and terminology is generally too complicated for a subject which is already quite complex. General feeling is that we need to be able to tailor communications to level of knowledge of the consumer that providers are in communication with.

A great focus on making the information more accessible is the thrust of the message here. There is a need to test communications and go again to refine it and make sure it works for constituent groups. And of course animated video, the panacea of all communications programmes today, can also be put to work to help cut through to policy-holders. And if in doubt you can always go to NEST’s golden rules of communication.

It is clear from this DP that the FCA is planning to shake up at-retirement communications quite a bit and we should expect to definitive rules and recommendations by late 2016. We will leave you with a summary of their initial market study:

1. It was essential that we change at-retirement communications to ensure clarity and simplicity for consumers, allowing them to exercise choice effectively.
2.
There was a need to trial a new ‘wake-up pack’ for consumers.

We would like to see communications that raise consumers’ awareness of the right to, and the benefits of, shopping around. Many consumers have multiple pots of pension saving and understanding choices at retirement requires an appreciation of their total pension savings and how this relates to the tax and benefits systems and the state pension. We believe that this comparison would be substantially easier if communications and terminology were standardised.

We are currently discussing with providers how they can work with us to behaviourally test new at-retirement communications. They will then be able to trial the information with customers and measure the impacts on our objectives.

We hope that, by working in partnership with the FCA, providers can develop communications that substantially reduce the quantity of unnecessary information provided while focusing on the key information needed by consumers. We intend to learn from this testing to consult on a further strengthening of our rules on at-retirement communications in late 2016.”


This is a topic that we will return to a great deal as best practice becomes clearer over the next year or so.