PensionsSep 28 2021

FCA has no plans to revive suitability review

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FCA has no plans to revive suitability review

The Financial Conduct Authority has no plans to revisit its second suitability review of retirement advice after it cancelled it several months ago.

Speaking at a press conference today (September 24), Sarah Pritchard, executive director of markets at the City watchdog, said the regulator does not have “any immediate plans” to revisit its suitability review that it previously paused and then cancelled.

Pritchard said instead the regulator is focusing on other areas in the pensions landscape, for example making sure consumers are receiving the right level of advice and guidance.

This is one of three FCA priorities, according to Pritchard, as she said currently consumers are having to make some very difficult and complex decisions and overall understanding of the pensions market, particularly defined contribution pension schemes, was low. 

She said: “We've got data that shows that ... about 45 per cent of individuals don't think about their retirement plans until two years before retirement, which, in a defined contribution environment is challenging and difficult for consumers to then exercise significant choice at that time.”

The second point of focus is to ensure that products are designed to offer value for money.

A few weeks ago, The Pensions Regulator and the Financial Conduct Authority published a joint discussion paper on value for money, to force defined contribution schemes to disclose more data around their investment performance, scheme oversight, and costs and charges.

Thirdly, the regulator wants to battle scams. 

Prtichard said these were the main priorities “at the moment” but she went on to say the FCA had done “a lot of work” to introduce investment pathways which are targeted at individuals who don't receive financial advice.

Pritchard said: “Investment pathways, which we introduced in February, provide a guided set of questions to enable people without financial advice, who have decided to enter into drawdown, to then decide more actively how they may wish to invest their pension.”

She added: “Overall, we remain committed as a regulator and jointly with others, and with the Pensions Regulator in particular, to playing our part to make sure that the markets are working well on [our] market integrity objective but also that consumers have the right level of advice and guidance needed to support them with quite complex choices that people have.”

The City-watchdog first began probing advisers on their retirement income advice records by sending a number of information requests to randomly selected advice firms at the beginning of last year. 

However, in the following May it confirmed its review had been delayed as it shed "non-critical" work in the face of the pandemic.