This concentrates on helping non-advised customers accessing their pensions, but has consequences for all savers.
Over the next year, it will introduce changes so:
- more wake-up packs are sent to all customers on a regular basis from age 50.
- expected charges are set out in pounds and pence on drawdown and UFPLS key feature illustrations.
- non-advised clients are offered investment pathways to help them make a decision about what investment option to choose to meet a particular objective once they have accessed their pension. An IGC should monitor the investment pathway investments to ensure they offer value for money.
- providers have to warn consumers who are invested pre-dominantly in cash.
- actual charges paid in pounds and pence are shown on annual drawdown statements.
FCA’s proposed remedies for non-workplace pensions
When considering the non-workplace pensions market, the FCA has not strayed too far (if at all) from this rulebook.
In fact, the solutions it is advocating look remarkably similar to those already adopted for other areas.
It proposes:
- providers will have to offer ready-made investment solutions (with lifestyling) to non-advised consumers to align with their broad objectives. This could be a single pathway or multiple pathways tailored to different objectives.
- providers will have to warn all customers about the long-term impact of investing predominantly in cash.
- providers will have to show charges incurred in pounds and pence. In addition an independent body, which will most likely be the FCA, will publish a charges league table to help people compare charges.
- considering further the role of IGCs in assessing value for money, and whether they would be appropriate and proportionate for the individual pension market. IGCs can be complicated and expensive beasts to run.
Adviser implication
None of the FCA’s research and findings will probably come as a surprise to financial advisers and planners.
The research throws into sharp focus the state of the individual pension market.
It highlights the vast number of people who are members of closed individual and stakeholder personal pensions.
These are likely to be older contracts, and many people could be paying much higher charges than they need to.
These people will greatly benefit from moving to a newer-style individual pension, offering lower charges and additional features, such as pensions freedom flexibility.
The FCA is advocating this cohort consider their current position and encouraging switches within this market.
Sometimes this can be complicated – especially if the person holds scheme-specific protection for higher tax-free cash or an earlier pension age – and these people will need help from financial advisers and planners to negotiate this route.
