The review will cover Personal Pensions, Stakeholder Pensions, SIPPs and other non-workplace pensions.
The regulator began the review today by launching discussion paper DP18/1 asking professionals to provide views and evidence to help the regulator assess how effectively competition is working.
The FCA is also looking at whether providers are competing on charges and if there are barriers to consumers identifying, and choosing, more competitive products.
DP 18/1 says that today marks the beginning of the FCA’s work to “diagnose whether there is harm in this market by seeking to better understand the potential presence, nature, extent and cause of any harm”.
Non-workplace pensions, also known as individual private pensions, collectively represent around £400bn in assets under management, the FCA estimated. This is more than double the amount invested in contract-based Defined Contribution (DC) workplace pension schemes. Research suggests that at least 1 in 4 adults have accumulated benefits in non-workplace pensions, officials said.
Christopher Woolard, FCA executive director of strategy and competition, said: “In recent years we, alongside the Department for Work and Pensions and the Pensions Regulator, have taken a number of steps to address weaknesses in the workplace pensions market. We believe it is now right to look at the other side of the picture and assess whether competition is working in non-workplace pensions.
“A diverse group of people save into non-workplace pensions and it is a growing market. We want to hear from anyone with an interest in this subject about how they think the market is working.”
The discussion paper said: “Our diagnostic work will also include a focused data request to providers (concerning their products, charges and means for ensuring fair outcomes for customers) and qualitative consumer research (to examine the factors that influence consumer decisions and behaviour, before and while invested in a non-workplace pension).
“We want to start a discussion with industry and consumer representatives in order to better understand the market for non-workplace pensions: the providers and consumers, and the relationship between them.
“As a starting point, this paper poses the question of whether the harms that the OFT identified in the workplace market are present in the market for non-workplace pensions.”
The OFT also found that competition alone could not be relied upon to drive value for money for all savers in the DC workplace pension market.
The OFT concluded that good quality, independent scheme governance could help to mitigate the impact of the weak demand side of the market by ensuring continuing scrutiny of value for money on behalf of scheme members.
The FCA said it was looking to understand how the differences and similarities between the workplace and non-workplace markets impact competition and consumer outcomes. It will consider whether customers can identify and freely move to more competitive products.
The regulator will publish further papers later this year as the probe continues. Anyone interested in giving their views can respond in the next three months to today’s discussion paper.