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.
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 19/21 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 19/21 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.
More recently, after consultation on transfers from defined benefit schemes, they have published Finalised guidance on advising on pension transfers (FG21/3) to help firms give suitable advice consistently. They state that some firms may need to make changes to their processes where their approach falls short of the standards set out.