FCA publishes pensions lifestyle strategy review

FCA has published the findings from its review of life insurers’ pension lifestyle investment strategies. It had asked 13 insurers what their approach was to these strategies in the light of the 2015 pension reforms and how consumer behaviour had changed as a result. FCA found that firms use different names for the books they operate, and there were some patterns which dictated the approach firms followed.  On the whole, FCA found:

  • firms had reviewed the appropriateness of lifestyle strategies for new business and post-2012 auto-enrolment, created new default funds and lifestyle glide paths and communicated appropriately with customers;
  • most firms are reviewing or plan to review existing business written before 2012. FCA is worried that this should already have been done for customers who are now at the “derisking” phase. Firms are often planning to move customers to funds that do not involve annuities by using deemed consent;
  • firms are even further behind in their plans to review business written before 2001, which also concerns FCA; and
  • most insurers think it is the responsibility of those who set up bespoke lifestyle strategies to review them, but nevertheless plan to communicate pro-actively with those parties and consumers about the need to review them for appropriateness. FCA is worried, though, that not all firms were taking the pro-active approach.