The regulator’s perspective
Following the introduction of pension freedoms, the FCA launched the Retirement Outcomes Review to assess how the market has evolved. The final report set out the FCA findings and the proposed remedies, which were released in two policy statements.
The FCA remains concerned about the efficient working of the retirement market. In June 2020, it announced a guidance consultation ‘Advising on pension transfers’ to protect members of DB schemes. FCA research suggests that the increasing number of people transferring DB benefits suggests that there may be ‘consumer harm’.
In January 2020, the FCA signalled its intention to undertake a second Assessing Suitability Review to consider the advice consumers receive during retirement. This is scheduled for early 2021.
The two policy statements, 19/1 and 19/5 are now effective.
Policy Statement 19/1 included:
- Revised rules about the information sent to consumers before they decide how to access their pension savings.
- Expectations about how firms should assess a client’s eligibility for ‘enhanced’ annuity rates and generate market-leading quotes.
- Changes to make the cost of drawdown products clearer and more comparable. Clarity around the costs of drawdown came into force in April 2020.
Policy Statement 19/5 included:
- Introducing ‘investment pathways’ for consumers entering drawdown without taking advice.
- Ensuring that consumers entering drawdown only invest mainly in cash if they take an active decision to do so.
- Requiring firms to send annual information on costs and charges for the previous year to consumers who have accessed their pension.