For those consumers able to engage, and who would benefit from doing so, the IFoA recommends greater engagement could be fostered through:
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a targeted approach to communications tailored to the individual;
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communications that help to build financial capability over time, making the decision-making process more manageable; and
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shifting the focus of communications from inputs to outcomes and focusing on goals for their retirement*.
However, for those consumers not able, or willing, to engage in financial decisions, the introduction of appropriate defaults for accessing their pension pots could help to prevent poor outcomes. It is important that any defaults have an effective governance structure in place and that robust consumer protections are in place to prevent consumers becoming tied into any potentially unsuitable products.
Research undertaken by the IFoA found that far more consistency is required across the whole customer journey, and that communications are often difficult for even professionals to understand and at worst incoherent.
The IFoA also suggests that the current regulatory framework has in some cases promoted a ‘tick-box’ approach, rather than an opportunity to inform consumers and aid in their financial decision-making.
Colin Wilson, President of the IFoA, comments, “Our research highlights there is a real need for information to be clear, unambiguous and in a format that the consumer can process so they can make the best decision for their individual circumstances. We are therefore advising in our response to the FCA’s consultation that more should be done to simplify the decision-making process for consumers. We also suggest the communications about retirement outcomes should focus on an outcomes-based approach*, where individuals plan for the type of retirement they aspire to and set saving goals much earlier in their working lives, as a better approach to engage consumers and help them understand how much they will need to meet their retirement goals.
“We welcome the FCA’s consultation on retirement outcomes and look forward to working with them on how to further engage and inform consumers so they can make the right choices for themselves.”
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