Over the past few months I have been saddened, but not at all surprised, to see an increasing number of stories published about consumers who took advantage of pension freedoms to access their pension pot, and find that now, just a few short years later, the money cupboard is bare.
Due to cashing in too early, and short-term budgeting, many individuals have found themselves in the unfortunate position of being forced back into the workplace in order to get by financially.
It goes without saying that the vast majority of these individuals did not benefit from the services of an adviser, who would have helped them to take a more holistic and realistic long-term view of their options before going into drawdown.
I was therefore pleased to see that the Financial Conduct Authority’s finalised rules on its Retirement Outcomes Review, published on July 30, stated that providers must offer non-advised consumers investment pathways.
By August 1 2020, any consumer entering drawdown, or transferring in assets already in drawdown, will be asked to choose one of four options, outlining how – and how soon – they plan to use their pot.
Although this is clearly no comparison to the huge amount of work advisers put into getting to know their client, and assessing the suitability of any solutions offered, it is heartening to see that the regulator is taking action to make sure the client at least considers their pension pot in relation to their plans for the future.
Although the impact of this will not immediately benefit the advice community, it will almost certainly affect consumers who, with some degree of planning, may become clients in the future and, as a result, facilitate the cascade of wealth to the next generation of potential clients.
I welcome this move from the FCA to encourage transparency and long-term thinking around drawdown, and believe we may well see more regulation and consultation in this area in the future.
While I think we all knew that the pension freedom chickens would come home to roost at some point, guidance like this from the regulator may at least mean that fewer consumer geese are cooked beyond redemption.
Ken Davy is chairman of SimplyBiz Group