The DC workplace industry has welcomed FCA proposals to introduced targeted support for pensions as a ‘third way’ option between full-fat advice and more generalised guidance.
Standard Life retirement savings director Mike Ambery says this was a significant step forward in bridging the gap between advice and basic guidance.
“Nearly 10 years on from pensions freedoms, many consumers saving into DC pensions lack the confidence to make informed decisions about their retirement savings. With just 9 per cent of people in the UK receiving financial advice, it’s clear that many are navigating a complex landscape without the support they need.
“By enabling firms to work with customers to determine whether there are common actions that people in similar circumstances typically take, these proposals should empower the industry to provide customers with beneficial journeys that can help them maximise their retirement income.”
He added that accessible advice and personalised guidance can boost people’s long-term financial wellbeing. “Targeted support is a good first step towards this greater accessibility, particularly as the FCA has suggested it should be provided for free – we know cost can be a barrier to seeking advice.”
Aegon pensions director Steven Cameron says: “The FCA’s latest consultation on targeted support reforms for pensions is the most exciting chapter yet in the long-running Advice Guidance Boundary Review saga. While there’s much detail to thrash out, targeted support could herald a ‘new dawn’, bringing huge benefit to the millions of auto-enrolees who regrettably won’t consider advice but who are crying out for help.
“Many auto-enrolees share what the FCA calls ‘common characteristics’ of not paying sufficient contributions to deliver an adequate retirement income. Others will never have considered investment options outside their default fund.
“The potential benefits are arguably even greater when it comes to making decisions around when and how to take a retirement income. Here, giving the consumer more confidence to make well-informed decisions with an understanding of the risks has to be a good thing.
“We’re pleased to see the FCA structuring its proposals primarily around the outcomes-based Consumer Duty, proposing further rules or guidance only where required to offer firms clarity or to ensure consumer protection.
“There’s major scope for firms to consider under which scenarios targeted support could offer ‘ready-made solutions’ to drive better outcomes, for identified customer segments, defined with appropriate granularity.
“It’s critical that consumers are made fully aware that targeted support will not deliver the value add of holistic financial advice, or offer a personal recommendation. But as well as being open to manufacturers, we strongly believe adviser firms should be given the option to design their own Targeted Support solutions alongside holistic advice should they identify a customer benefit.”
Pete Glancy, head of pension policy at Scottish Widows adds: “We surveyed over 5,000 people this year, where around three in four of those who had taken financial advice found it helpful. However, only 19 per cent of people had been able to take financial advice, with the cost making it inaccessible to the majority.
“People want meaningful help from experts when it comes to making big decisions and financial experts such as pension providers need to find ways of steering people towards good outcomes and away from risky or damaging situations. The FCA’s proposals would allow us to have conversations with customers which were not possible before and this is therefore welcome.
“Many people have both pensions and other forms of investment, sometimes held within a single product, known as a platform. Although the FCA is consulting on the pension elements now and the investment elements in a few months’ time, it’ll be important to ensure that there is consistency across both pensions and investments in any targeted support and we’ll review the detailed proposals once published.”
Stephen Lowe, group communications director at retirement specialist Just Group adds:: “The latest data from the FCA shows that only four in 10 pensions accessed in 2023/24 were taken with the help of regulated advice or guidance so it is clear that further interventions are necessary in order to help more people get support when first deciding how to use their pensions.
“This is a once-in-a-decade opportunity and its critical everyone across the industry gets behind this theme for the benefit of savers. Closing the advice gap by a meaningful amount is realistically likely to be a multi-year project. Targeted support could be a game changer and it’s the service that has generated most optimism.
“In addition, we would also like to see further steps to make the use of the Government’s free independent and impartial guidance service, Pension Wise, ‘the norm’ so that it becomes a natural step before first accessing pension cash.”
Kevin Hollister, pensions actuary and founder of Guiide, a free retirement planning platform said: “The FCA states that 75 per cent of the 16m people over 45 saving into a pension scheme have no plan as to how to use their saved pots as a retirement income. Therefore much more help is needed and must be provided under a guidance framework. The FCA have termed this help ‘targeted support’ and specifically mention the needs of pension savers on avoiding unsustainable withdrawals from their pension pots.
“Guiide have been providing this exact support for free over the last four years to hundreds of thousands of pension savers. Given this, we very much welcome this news. We hope that the kind of support we have been providing in building, testing and tracking sustainable withdrawal plans becomes common place throughout the pension industry given this new push.”
