Making sure consumers can make informed investment decisions is an important part of ensuring healthy capital markets which deliver growth. The FCA aims to help people have access to more help, guidance and advice across all aspects of their financial lives. More than 16 million people in the UK save for their retirement into defined contribution pension schemes.
However, 75% of consumers, aged over 45, do not have a clear plan for how to take money from their pension or didn’t know they had to make a choice (Financial Lives survey, 2024).
FCA consumer research shows:
engagement by consumers with and understanding of pensions is low
the vast majority of consumers are ill-equipped to manage complex pension decisions confidently as only 9% of adults have taken full regulated advice in the last 12 months (Financial Lives Survey, 2024)
some people are disengaged because they fear knowing the reality of their pension pots - the so-called Ostrich effect - worrying about whether their pension will be sufficient in retirement
Most people still lack the support needed to make critical choices about their pensions. Decisions on saving, investing and how to use their life savings are critically important, and some may struggle to make the right choice for them without help. Now the FCA has set out ways to tackle the gap that exists between bespoke financial advice and guidance – examples of existing guidance being information provided for free through MoneyHelperLink is external, as well as by firms.
Targeted support would allow firms to provide support to consumers in different scenarios, for example, if they identify someone is drawing down on their pension unsustainably, or where a consumer is facing uncertainty about how to take a retirement income. Firms would be able to provide a bespoke suggestion to specific groups of consumers who share the same characteristics. The FCA is suggesting that targeted support is provided for free. The FCA will follow with further proposals on introducing concepts of targeted support and simplified advice for other retail investments next year.
This is a significant moment as the reform to the regulatory framework will set the standards for years ahead. The FCA encourages feedback from all stakeholders about the proposals and views are sought by mid-February 2025.
Sarah Pritchard, executive director of consumers, competition and international, at the FCA, said: 'We want people to have access to the help, guidance and advice that they need, at a cost they can afford, when they need it, so that they can make informed decisions. So, we are reviewing the boundary between guidance and advice across investments. We know people find pensions particularly difficult to understand, so we are deliberately starting with this to help consumers with their pension decisions. If we get this right, consumers will be better supported in making financial decisions. This will potentially lead to more people investing, which will help provide capital necessary to stimulate economic growth.'
Alongside this, the FCA is seeking views on whether there are any other specific areas of its regulatory framework which may need to change to enable firms to better support consumers.
Through a separate discussion paper the FCA is seeking views on whether further changes might be needed to better support consumers, such as the use of digital tools, consolidation of pension pots and the rules around Self-Invested Personal Pensions (SIPPs).
|
