By James Jones-Tinsley, Self-Invested Pensions Technical Specialist at Barnett Waddingham
Late last year, the FCA launched a consultation that reopens a debate the industry has grappled with for years – how to better support individuals making retirement decisions without crossing the boundary into regulated advice. The paper introduced a new term, targeted pensions support, which aims to sit somewhere between generic guidance and full financial advice.
"The FCA is searching for a ‘sweet spot’ between guidance and advice that has long eluded the industry."
The rationale is clear. Ten years on from the introduction of pension freedoms, consumers are still struggling to navigate a growing menu of retirement options. Yet many do so without help. Surveys suggest widespread gaps in understanding: over a third of people don’t know what flexi-access drawdown is, and nearly as many are unfamiliar with annuities.
With millions of auto-enrolled savers approaching retirement, the stakes are high – and the advice gap is only widening.
A framework for smarter support
The FCA’s consultation outlines three key components to its proposed framework:
Scenario-based interventions: Firms would identify specific situations where consumers may need additional support – for example, holding too much cash in a pension, withdrawing funds too quickly, or under-contributing. The goal is to prompt timely action without giving formal advice.
Segmentation by need: Consumers could be grouped into broad categories, such as younger savers with low contributions or those nearing retirement with insufficient savings. Support would then be tailored accordingly. However, this method risks oversimplifying the complex nature of personal finances.
Structured nudges and tools: Standardised resources – such as prompts to increase contributions, guidance on drawdown sustainability, or model investment pathways – would aim to help consumers make better decisions. Yet these tools may not always reflect an individual’s unique circumstances, potentially leading to poor outcomes.
Who benefits – and who pays?
There’s little doubt that broader access to targeted guidance could help those priced out of full advice. Larger firms and pension providers, in particular, may be well-positioned to deliver such support at scale.
However, this shift is not without risk. The FCA has flagged several concerns:
Commercial conflicts: Firms might use support as a route to promote their own products.
Regulatory tension: Too much oversight could stifle creativity; too little could leave consumers vulnerable.
Engagement fatigue: If done poorly, guidance initiatives could overwhelm rather than empower.
"The industry must avoid crossing the line between helpful nudges and hidden agendas."
To help fund this initiative, the FCA is investing £3.7 million in partnership with the government, aiming to pilot ways for firms to deliver more targeted pensions and investment support without providing full advice. It’s a bold move, and one that hints at possible future flexibility in how advice is delivered.
Modest fee increases to fund big ambitions
Advisers will see the effects of this shift in their annual fees. For those in fee-block A.13, the FCA is proposing a 2.8% rise – from £103 million to £106.5 million. Smaller firms will also see their minimum fees increase to £2,000, up from £1,750 last year.
These changes are part of a wider uplift in the FCA’s annual funding requirement, which is set to rise to £783.5 million – a 2.5% increase overall. The regulator notes that this is partly driven by investments in "exceptional projects" such as the advice/guidance boundary review.
A step forward – but not the full journey
The FCA’s new focus on targeted pensions support may not solve the advice gap overnight, but it signals a willingness to experiment with new ways of helping consumers. If implemented carefully, it could enable firms to support clients more meaningfully – especially those who have historically fallen outside the advice model.
For now, advisers should consider the potential for hybrid or simplified services that align with the FCA’s direction. Because while the costs of delivery may be shared, the benefits – if the model works – could be significant for both consumers and the advice profession.
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