The Financial Conduct Authority (FCA) has laid out plans for extra support for UK savers in making decisions about their pensions.
The FCA noted more than 16m people in the UK save for their retirement into defined contribution pension schemes, but 75% of consumers aged over 45 do not have a clear plan for how to take money from their pension or didn’t know they had to make a choice.
The regulator added that people are ‘disengaged’ because they fear knowing the reality of their pensions and suffer from ‘the so-called Ostrich effect’ of burying their heads in the sand.
The FCA is seeking to ‘tackle the gap that exists between bespoke financial advice and free guidance’, like MoneyHelper.
It is proposing a new form of ‘targeted support’ to allow firms to help consumers in different scenarios. For example, if they identify someone is drawing down on their pension unsustainably.
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Firms would be able to provide a bespoke suggestion to specific groups of consumers who share the same characteristics. The FCA is suggesting that targeted support is provided for free.
The FCA will make further proposals on introducing concepts of targeted support and simplified advice for other retail investments next year.
It is open to feedback from stakeholders until mid-February 2025.
The plans are part of a wider review of how the boundary between advice and guidance on investments operates.
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Sarah Pritchard, executive director of consumers, competition and international, at the FCA, said: “We want people to have access to the help, guidance and advice that they need, at a cost they can afford, when they need it, so that they can make informed decisions. So, we are reviewing the boundary between guidance and advice across investments.
“We know people find pensions particularly difficult to understand, so we are deliberately starting with this to help consumers with their pension decisions.
“If we get this right, consumers will be better supported in making financial decisions. This will potentially lead to more people investing which will help provide capital necessary to stimulate economic growth.”
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