‘Targeted support’ would allow pension 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. The FCA is suggesting that targeted support is provided for free.
The move is part of a wider review of how the boundary between advice and guidance on investments operates.
The regulator said that making sure consumers can make informed investment decisions is an important part of ensuring healthy capital markets that deliver growth.
More than 16 million people in the UK save for their retirement into defined contribution pension schemes. However, according to the FCA, 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.
According to the FCA’s Financial Lives Survey for 2024, the vast majority of consumers are “ill-equipped to manage complex pension decisions confidently”, with only 9% of adults taking full regulated advice in the past 12 months.
Wellness and wellbeing holidays: Travel insurance is essential for your peace of mind
Out of the pandemic lockdowns, there’s a greater emphasis on wellbeing and wellness, with
Sponsored by Post Office
‘Further interventions are necessary’
The FCA said some people are disengaged because they fear knowing the reality of their pension pots – the so-called ‘Ostrich effect’ – and worrying about whether their pension will be sufficient in retirement.
Stephen Lowe, group communications director at retirement specialist Just Group, said: “The latest data from the FCA shows that only four in 10 pensions accessed in 2023/24 were taken with the help of regulated advice or guidance, so it is clear that further interventions are necessary in order to help more people get support when first deciding how to use their pensions.
“This is a once-in-a-decade opportunity and it’s critical everyone across the industry gets behind this theme for the benefit of savers. Closing the advice gap by a meaningful amount is realistically likely to be a multi-year project. Targeted support could be a game-changer and it’s the service that has generated most optimism.
“In addition, we would also like to see further steps to make the use of the Government’s free independent and impartial guidance service, Pension Wise, ‘the norm’ so that it becomes a natural step before first accessing pension cash.”
James Carter, head of platform product policy at Fidelity International, said: “Of the proposals the FCA made through its review, we believe that targeted support has the most potential to address the issues [that] have been identified. It will allow firms to target messages at groups of consumers in an impactful way to better enable them to avoid a wide range of foreseeable harms; for example, unsustainable withdrawals. We believe that this is the critical measure to mitigating the advice gap.”
