The financial watchdog has proposed a tightening of rules to check whether members of workplace pension schemes are getting value for money.
In a consultation paper released this morning, the Financial Conduct Authority (FCA) announced it would bring forward the proposals to make it easier for Independent Governance Committees (IGCs) and Governance Advisory Arrangements (GAAs) to compare pension products and services.
The watchdog has proposed a framework for the annual assessment process, including a definition of value for money. It said the three key factors for determining value were charges and costs, investment performance and quality of service.
Since 2015 personal workplace pensions have been overseen by IGCs to ensure customers are not being ripped off. However, a lack of consistency in the way IGCs and GAAs operate means a number of members of workplace pension schemes may not be getting the best deal.
The review found that some IGCs lack the necessary independence and were “ineffective at challenging firms to ensure value for money for workplace pension scheme members”. Additionally, GAAs operated by third-party firms on behalf of pension providers were less effective at ensuring value for money.
Executive director of supervision, Megan Butler said: “Our separate review into IGCs and GAAs lays out the key lessons that need to be learned to ensure that workplace pension holders get a fair deal.”
“The FCA has carefully considered these findings and is asking firms that do not meet our requirements to make improvements.”