The FCA recently issued its long-awaited policy statement on disclosing costs and charges to workplace pension scheme members – PS20/2. I wrote about this back in June last year, shortly after the consultation had closed and it had all been very quiet for a long time.

I had a number of issues with the proposals, the first and biggest one being how the FCA was defining “workplace pension.” In the consultation any scheme with a direct pay arrangement was caught – including a one-member SIPP if there was a direct debit for contributions from the employer. 

I understand the need for protecting scheme members, but it’s always going to be difficult when you have one set of regulations for vastly different types of pension schemes. SIPPs are not the target market for these rules, but are caught under the net.

Similarly investment pathways feels like a shoehorn in for SIPPs – they’re not exempt but the rules definitely were not written with SIPPs in mind.

The regulator has a tough job trying to regulate a wide range of pension models under a single set of rules. This problem is getting worse now we have the FCA trying to align with TPR – an idea that sounds great in theory, but in practice means even greater variance in schemes covered by narrower regulations that are not a great fit for more schemes.

Back to PS20/2 and “workplace” pensions.

It was pleasing to see that the FCA has changed its stance on the one-member issue. The confirmed rules mean that only schemes where there is one payment from the employer for two or more members will now be caught.

The other key issue was the need to illustrate the impact of charges on every available fund the member could select. In a SIPP world this is totally impractical – on a platform there will be thousands of funds, so illustrating all of them would be information overload and a waste of everyone’s time. The FCA has taken this into account in the policy statement, amending the final rules so that providers only have to illustrate on default funds and a “representative range” of alternative funds.

This decision has come under some criticism on Twitter and in the press, with concerns being voiced that it is diluting the protection to pension scheme members and that the FCA should not have bowed to pressure from providers.

I’m sorry but I have to disagree. Providing thousands of pages of figures - which would be largely irrelevant to the vast majority of members - would be at best disproportionate and ultimately the extra workload would have to be paid for somewhere.

It’s not a question of providers thinking customers would not necessarily understand it either – even highly educated people would lose the will to live long before getting to the end of thousands of pages of content.

The FCA has a tough job making rules that fit so many different types of pension schemes, as one size clearly doesn’t fit all. I think the steps it has taken in this instance are proportionate and the fact that it has listened to the industry should be seen as a good thing.

Lisa Webster is senior technical consultant at AJ Bell