The number of self-invested personal pension providers catering for non-advised clients could shrink due to new rules being considered by the Financial Conduct Authority.
As part of its Retirement Outcomes Review, the FCA proposed pension providers offered their non-advised customers a choice of investment pathways to meet their retirement objectives.
This was after it found many consumers were solely focused on taking tax-free cash from their pensions and were "insufficiently engaged" with deciding how to invest funds that moved into drawdown.
The new rules will also apply to Sipp providers which have more than 500 non-advised clients going into drawdown each year, which means some operators, more focused on advised consumers, could end up withdrawing their services from the market as it would prove too expensive to introduce these pathways.
Jessica List, pension technical manager at Curtis Banks, told FTAdviser the regulator's research identified the pathways solution "may not be suitable or necessary for Sipp operators who focus primarily on advised clients and so-called 'sophisticated' investors".
She said: "However, the proposed easement is based purely on the number of non-advised clients an operator has per year.
"This could mean that a very small direct-to-consumer operator could be exempt, or that a very large operator focusing on advised clients would still be caught.
"Although the research shows that the majority of these adviser-focused operators would currently qualify for the easement, the Sipp market is continuing to grow and consolidation activity is still taking place.
"Therefore, it will be important for the FCA to monitor this easement on an ongoing basis to make sure that its terms capture the intended operators."
According to research from the regulator published in the Retirement Outcomes Review consultation paper, 18 per cent of Sipp providers said they would implement investment pathways, including the largest operators by number of non-advised consumers.
Some 39 per cent said they would rather restrict their drawdown offering to advised consumers only, with the remaining 42 per cent being unsure.
However, the 18 per cent who said they would implement investment pathways have 76 per cent of the non-advised Sipp plans that went into drawdown last year, the FCA stated.
AJ Bell and Hargreaves Lansdown have confirmed to FTAdviser they intend to introduce these pathways.
Ms List said: "The vast majority of non-advised consumers should be with operators who will either offer investment pathways or qualify for the easement.
"However, there may still be operators who decide to restrict drawdown to their advised customers only, and those individuals will have to choose between taking advice or transferring to a new provider in order to access their pension benefits."
Ms List argued the impact for financial advisers could be mixed.
She said: "On one hand, the pathways solution may draw attention to the importance of investment decisions while in drawdown and encourage more people to seek advice.
"On the other hand, some people who may have otherwise considered taking advice could decide not to, feeling that they've done enough by choosing a pathway."