The regulator's perspective

Following the introduction of the pension freedoms in 2015, the FCA launched the Retirement Outcomes Review to assess how the market has evolved and to address any areas of concern. The primary focus of the FCA’s concerns lie with the number of people choosing drawdown without advice. 

In June 2017, the FCA published its interim report that identified areas of concern. This in turn has led to a consultation paper, which proposed a number of changes to the way the market operates:

  • ‘Wake-up’ packs should be sent out from age 50 and every 5 years until the customer has accessed their pension pot.

  • A single page summary should be included as well as specific retirement risk warnings.

  • Investment pathways should be explored at the point customers enter drawdown. 

  • A one year charges figure in pounds and pence to be included in Key Features documents (a charge cap has not been ruled out by the FCA). 

The FCA plans to publish its feedback on the consultation in January 2019 and to issue a second consultation paper. Feedback on the second consultation is scheduled for July 2019. 

Assessing suitability

In 2012, the FCA reviewed the emergence of Centralised Investment Propositions (CIP). Its findings are just as likely to apply to Centralised Retirement Propositions. In summary, it concluded that while there were undoubted benefits to a well-constructed CIP, there were areas of concern firms should bear in mind when constructing a CIP:

  • The needs and objectives of clients should be at the heart of any CIP.

  • There is a risk that clients are shoe-horned into a CIP – it’s not right for everyone.

  • Firms should ensure there are robust checks and controls to mitigate against poor outcomes.