The Financial Conduct Authority (FCA) has launched a consultation on rules intended to better support consumers using digital pension planning tools and consumers making non-advised decisions to transfer defined contribution (DC) pensions. 

The FCA previously shared a discussion paper in December 2024 calling for input on areas of its regulatory framework for pensions that may need to evolve, alongside the wider programme of policy change across government and regulators, to meet the future needs of consumers.

Based on the industry feedback received, the FCA is now consulting on several proposals, including plans for a new regime for interactive digital pension planning tools for in-force pensions.

The FCA suggested that, in an increasingly online environment for consumers, digital tools and modellers provide an opportunity to improve support and engagement with pensions.

However, it acknowledged that the current rules may be limiting firms from offering good tools and modellers, with its plans for a new regime therefore intended to allow consumers effective and engaging digital tools with sufficient protections against potential harms.

Broadstone head of DC workplace savings, Damon Hopkins, welcomed the proposed new regime, suggesting that "enabling greater innovation in this area will help firms provide better tools and communications to pension savers".
 
“It could give people the opportunity to see in real terms how changes in their pension accumulation, such as increasing contributions or working for longer, could impact their retirement income," Hopkins said.

"With pensions dashboards and targeted support coming on stream shortly, it will provide savers with a growing suite of digital tools to help achieve financial security.”

DC to DC transfers

In addition to this, the FCA has outlined plans for a new process to support non-advised consumers to make informed decisions about whether and where to transfer or consolidate DC pensions. 

The FCA noted that while savers may want to consolidate pots, with demand for consolidation expected to increase when the introduction of pensions dashboards raises consumers’ awareness of how many pots they hold, it is important that transfers and consolidation are efficient and in the consumer’s interests.

And whilst the regulator acknowledged that many firms already flag to consumers where ceding schemes have valuable benefits, it pointed out that, currently, different firms communicate this to the consumer in various ways, with not all savers understanding certain features.

The FCA's previous call for input supported this, as some industry respondents shared its concerns that some consumers are transferring without understanding the features of their ceding schemes, with some even highlighting cases where consumers, using trace and consolidate services, inadvertently triggered an instruction to transfer.

Given this, it has outlined proposals that would mean that engaging firms cannot transfer a pension until the individual has been presented with the minimum necessary information to compare the receiving and ceding schemes, and make an informed decision whether to transfer or consolidate.

The proposals would place responsibility for this with engaging firms, who, acting with the consumer’s consent, would be required to gather information from ceding schemes.

They would then be required to present the information about ceding and receiving schemes back to the consumer in a clear and comparable format.

Whilst the FCA acknowledged that these proposals will build time into the consumer’s transfer decision-making process, it argued that they do not extend the time required to process a transfer request after a consumer formally starts the application process.

"In fact, by eliminating the need for certain post-instruction checks, our proposals could reduce the time it takes to complete a transfer in certain case," the consultation stated.

These proposals have already seen early industry support, as People's Partnership CEO, Patrick Heath-Lay, suggested that placing greater emphasis on clear, objective comparisons between ceding and receiving schemes is essential.

This comes after People’s Pension’s latest Transfer Outcomes Index revealed a wider pattern of detriment, with savers at risk of losing £1.7bn in a single year from poorly informed transfers across the market.
 
Given this, Heath-Lay highlighted the changes as "a big step forward as the FCA has got to the heart of the matter: it’s the quality of the decision that matters most when transferring a pension".
 
“The next step should be to consider how these proposals fit with the value for money agenda. From 2028 workplace schemes will be rated on the value they offer but should be extended to all pension providers," he stated.
 
“The FCA should also be thinking ahead to how pension products will be seen and compared on pension dashboards when they launch later this decade. They’re right that dashboards will transform the way people engage with pension saving - but the logical next step should be clear value for money ratings on dashboards."

Association of British Insurers (ABI) head of long-term savings policy and assistant director, Rob Yuille, agreed that "the FCA is right to seek consistency in pension transfers, to achieve good customer outcomes and efficient transfer times".

However, he clarified that, in finalising the rules, it is "critical" for the FCA to work with industry to ensure the process is not cumbersome for consumers, and for the Department for Work and Pensions (DWP) to apply the same measures for occupational pensions.

"Similarly, balancing uniformity with flexibility is vital to make sure the projections regime makes sense to consumers," he stated. "These proposals reinforce the need for FCA and DWP both to align, and to adapt to evolving policy, for example, on pensions dashboards.”

This is not the only concern, as Heath-Lay argued that "while there is much to welcome in these proposals, stopping short of banning incentives is a missed opportunity".

"Our research shows how quickly incentives can distort decision-making and lead to long-term losses. We look forward to working with the FCA and government to ensure reforms genuinely protect pension savers," he stated.

However, whilst the FCA confirmed that it is not currently proposing an explicit ban on incentives, it suggested that adherence to the Consumer Duty will effectively limit their use in the non-advised market.

"We consider it would unlikely be compatible with Consumer Duty requirements – such as the obligation to act in good faith – for firms to offer incentives where these have the effect of undermining the significance of the information presented to the consumer, or to encourage consumers to opt-out of the information gathering exercise," it stated.

The FCA also confirmed that it will monitor how the market responds to the new process and may make further changes where this is necessary to protect consumers.

SIPP changes

The FCA is also consulting on plans to change its framework surrounding self-invested personal pensions (SIPPs), following concerns that regulation has not always kept pace with the variety of business models.

In addition to this, it called for further ideas and insight on what changes could enable investment in productive finance assets, where this can improve long-term outcomes for pension savers.

"For example, in recent years we have made significant changes to the permitted links regime and would welcome comments on whether there is more we could do," it stated.

The consultation, which is open until 12 February 2026, was published at the same time as the FCA's near-final rules for targeted support, to ensure stakeholders can consider the proposals in the light of these new rules.  

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