Pension firms must do more for customers who are in older pensions, the City regulator has said.
The Financial Conduct Authority (FCA) looked at firms’ practices for unit-linked non-workplace pensions and savings.
Unit-linked funds are pooled investments offered by insurance companies through life insurance-based pensions and savings products.
They hold more than £1 trillion of customer investments.
Under the Consumer Duty, firms should be able to show that products deliver fair value and support good outcomes for customers, including those who are less engaged.
The FCA found that many unit-linked products deliver fair value to customers.
But its review found that some customers holding legacy products were receiving poorer value than those in newer products – often because of older product designs, multiple layers of charges and limitations in firms’ data.
Firms need to be actively identifying areas of poor value in legacy books and acting where necessary to ensure compliance with the Consumer Duty, the regulator said.
The FCA said good practices it had found included some firms capping or reducing charges for customers in legacy products.
Some firms were also comparing outcomes across different customer groups and products, and moving customers to better-value alternatives.
The regulator is calling on all pension providers to take on the good practice identified.
It said it is also engaging with firms on barriers they face in improving the value for customers, particularly in closed books.
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Many legacy unit-linked contracts are administered on older IT platforms – but the FCA said it expects firms to make sure they can access data needed to monitor outcomes and show fair value on an ongoing basis.
Charlotte Clark, director of cross-cutting policy and strategy at the FCA, said: “Consumers in older products should not be left behind, and the good news is that some firms are already showing it doesn’t have to be this way.
“We want to see that progress reflected right across the market.”
Firms with limited or no unit‑linked non‑workplace pension or savings business may also find the good practices helpful when assessing value across their products, the FCA said.