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U.K. Financial Conduct Authority to look at individual DC market risks

The U.K. Financial Conduct Authority, in cooperation with The Pensions Regulator, is seeking industry input on individual defined contribution arrangements.

The regulators did not devote time to study this segment when they examined the impact of auto enrollment on occupational pension funds last year. However, the FCA said participants in individual retirement savings vehicles are exposed to similar risks.

"We estimate that non-workplace pensions collectively represent around 400 billion ($554 billion) assets under management, more than double the amount invested in contract-based defined contribution workplace pension schemes," the FCA said.

The regulator identified a number of areas of concern in this market that it will study during the consultation, including product complexity, barriers to switching providers and stagnant fees caused by a lack of competition in the market. The FCA seeks to find out if in the light of auto enrollment, competition was likely to drive better outcomes for plan participants. The FCA is also concerned that informal default funds may be operating in the market for non-workplace plans that are not subject to the same protection as default funds in occupational plans.

"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," Christopher Woolard, FCA executive director of strategy and competition, said in a news release.

The FCA is seeking feedback until April 27 via its website.