Pension savers potentially eligible for targeted aid under fresh plan proposals
In a significant move aimed at improving retirement outcomes for millions of savers, the Financial Conduct Authority (FCA) has proposed a new approach to pension advice in the UK. The plans, which have been welcomed by the industry, focus on introducing 'targeted support', a novel type of help designed to assist groups of consumers with common retirement decision-making scenarios.
Under the proposed changes, financial firms would be enabled to offer suggestions to groups of consumers who share characteristics, such as unsustainable pension drawdown, insufficient retirement savings, or excess cash in current accounts. For instance, firms could suggest more tax-efficient pension withdrawal methods or recommend specific investment products suited to the group's needs.
The FCA's proposals aim to bridge the 'advice gap' by providing personalized yet scalable support, going beyond just factual information to allow firms to suggest appropriate actions or products tailored to consumer groups. However, the FCA acknowledges the need for some adjustment to the regulatory framework to facilitate this support model while maintaining consumer protections.
Lisa Picardo, chief business officer at PensionBee, believes that under Consumer Duty, pension providers should already be offering targeted help in many circumstances. She believes these reforms could have a transformational effect on retirement decision-making, making it more accessible and affordable for consumers.
Anne Fairweather, head of government relations at Hargreaves Lansdown, echoes this sentiment, stating that the proposals could give people added confidence and have a fundamental impact on their retirement income.
The FCA's review on the boundary between guidance and advice, which extends across investments with a particular focus on pensions due to their complexity, is also underway. This review is crucial, given that financial advice can be expensive, causing those with modest investments to rely on guidance instead.
These reforms are described as "once-in-a-generation," aiming to create a modernized and enduring advice framework for the next 20-30 years, supporting millions of savers now and in the future. The FCA envisions that targeted support can offer practical suggestions based on “standard scenarios” that reflect typical consumer situations in retirement, such as how to access pensions or invest excess funds more effectively.
In summary, the FCA proposes to allow firms to give personalized targeted recommendations to groups of DC scheme savers based on common retirement decision scenarios, with safeguards to ensure advice quality and consumer protection. This is intended to improve support and reduce the significant gap in pension and investment advice uptake among consumers. The proposals, if implemented, could revolutionize the pension advice landscape in the UK, making it more accessible and affordable for all.
- The FCA's proposals for a new approach to pension advice in the UK aim to offer personalized targeted recommendations to groups of consumers, such as those with insufficient retirement savings or unsustainable pension drawdown, by suggesting more tax-efficient pension withdrawal methods or specific investment products, thereby bridging the advice gap in personal-finance management.
- The reforms proposed by the Financial Conduct Authority (FCA) in the UK, designed to revolutionize the pension advice landscape, could potentially impact the way individuals manage their savings, pensions, and investments, making the process more accessible and affordable, ultimately leading to better retirement outcomes for millions of savers.
