The Financial Conduct Authority has set out proposals to help millions of UK savers access more support with their pensions.
More than 16 million people in the UK save for their retirement into defined contribution pension schemes. However, 75% of consumers aged 45 and over, do not have a clear plan for how to take money from their pension or did not know they had to make a choice.
According to the watchdog’s findings, engagement by consumers with pensions is low, with the vast majority ill-equipped to manage complex pension decisions confidently and others in denial about the reality of their pension pots, worrying about whether their pension will be sufficient in retirement.
In response, the FCA has set out ways to tackle the gap that exists between bespoke financial advice and guidance through the use of targeted support. It will allow firms to provide support to consumers in different scenarios, for example, if they identify someone is drawing down on their pension unsustainably or where a consumer is facing uncertainty about how to take a retirement income.
Firms would be able to provide bespoken suggestions to specific groups of consumers who share the same characteristics for free.
The FCA is calling for feedback from all stakeholders by mid-February 2025.
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.
“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.”
The FCA is also seeking views on whether there are any other specific areas of its regulatory framework which may need to change to enable firms to better support consumers.
Stephen Lowe, group communications director at retirement specialist Just Group, said: “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.”
Stuart Ritchie, GSB Wealth Partner, welcomed the proposals, calling them a “step in the right direction.”
“Helping people navigate complex pension decisions with clearer guidance and targeted support will make a real difference. For far too long, we’ve faced a gap between financial guidance and advice, leaving many people to make serious decisions with limited support.
“I am well aware that advice often reaches those who are relatively well off, with less than 10% of those approaching retirement receiving advice. By identifying common actions for people in similar circumstances, the profession can create more accessible and beneficial journeys to help individuals maximise their retirement income.”
