Pension providers given discretion on non-advised clients

The FCA has stuck to its guns on allowing providers 12 months to implement the changes, despite respondent providers claiming such a timeline would be "challenging" as a result of IT and system changes and suggesting an 18 month implementation period instead.

Small providers will be able to rely on an easement however, so that while they have to present the investment pathways, they do not have to offer investment solutions - the ‘pathway solutions’ - themselves.

The regulator said delaying implementation, even by a few months, would "increase consumer detriment" with its data suggesting around 5,000 pension pots enter drawdown each month without advice being taken.

Stephen Lowe, group communications director at Just Group, said: "The implementation of investment pathways offers another protective blanket for consumers entering drawdown without taking advice, and the FCA’s announcement makes specific provision for those investing predominantly in cash.

"Further measures to improve transparency by giving consumers annual information on the fees they are incurring on their pension savings will also benefit both advised and non-advised consumers, and aim to drive increased shopping around."

But Mr Lowe warned the new rules continue to "treat the symptoms rather than the cause of the problems" which consumers face when accessing their pension savings without advice.

The final Retirement Outcomes Review found that around 30 per cent of consumers were entering drawdown without seeking advice or guidance and 33 per cent of these non-advised consumers were wholly holding cash putting them at risk of a significantly lower annual incomes or of running out of money, Mr Lowe said.

He added: "Improving the take up of advice or guidance is therefore crucial to improving later-life outcomes for many of these consumers."

"The Financial Guidance and Claims Act mandated everyone must receive independent and impartial guidance before accessing their pension savings – unless they opt out.

"The FCA is now tasked with determining the opt-out process and it must ensure that it is an ‘active’ rather than a ‘passive’ decision.

"While many argue this might cause friction for consumers, this is no bad thing as consumers juggle irreversible and complex decisions with their lifetime savings.

"Implementing this act successfully will be the biggest regulatory step since the introduction of pension freedom as it gets right to the heart of the problem and should improve the lives of millions."


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