The Financial Conduct Authority is “actively considering” whether pensions decumulation should be included within the scope of its advice guidance boundary proposals.
Speaking as part of a panel discussion at the FT Adviser Retirement Income briefing today (April 30), Kate Tuckley, head of department, consumer investments at the FCA, unpacked the regulatory environment for retirement advice.
When looking at the advice guidance boundary in connection with the regulator's retirement income advice review, Tuckley said it was important for advisers to maintain and raise standards when thinking about opening up the market to new forms of advice.
“In response to our discussion paper on the advice guidance boundary we received comments about the fact decumulation advice should be within some of those proposals and we can say we are actively considering that.”
The session, which was sponsored by BNY Mellon, delved into the FCA’s first extensive thematic review into retirement advice and what advisers can do to improve in this space.
Tuckley believed that raising and maintaining standards in advice was critical to the FCA’s vision.
She said: “We want to be a market where consumers can make good decisions, where they have the support they need and where they can access products that are suitable for their needs and characteristics.
“We want consumers to understand the risks and the regulatory protections available to them so they can invest in confidence.”
Tuckley felt the time was “absolutely right” for the FCA’s retirement income advice review.
She said: “When you look at the stats there was no way we couldn’t start to look at retirement income advice, it was absolutely critical that we did so.
"Following our previous work on defined benefit advice and pensions freedoms, retirement income advice was the natural next step, particularly looking at the harms.”
Tuckley highlighted harms such as people running out of money if they are not properly advised, not having a sustainable income, being put into products that have charges which are punitive, as well as ending up in products which are not suitable for their needs or circumstances.
“Harms are acute and we wanted our review to address that and we looked at it in the space of consumer duty."
The review had a section on consumer duty and how firms can evolve their processes to meet compliance as well as included examples of poor practice.
“If some of the examples relate to your firms you are probably not meeting the standards of the duty going forward, and we would encourage everyone to look at that section because it is critical,” Tuckley added.
Tuckley was joined by Richard Parkin, head of retirement at BNY Mellon Investment Management, Rachel Vahey, head of public policy at AJ Bell and Heather Hopkins, managing director of Next Wealth.
Parkin also agreed now was the right time to be thinking differently about retirement advice and in particular risk.
He said: “It’s fair to say when pension freedoms came along there was a lot of talk about risk, sequence and return risk but the market never really demanded we focus on that until 2022 when everything came at once.
"We had market volatility, which in my view will persist, then inflation which we generally haven’t had to think about before and then of course we have regulation on top.
“So now is totally the right time to be talking about this and advisers’ approach.”
alina.khan@ft.com
