Industry experts have welcomed the Financial Conduct Authority’s proposals on targeted support for pension savers but warned that support must be flexible for it to be successful.
As part of the Advice Guidance Boundary Review, the regulator said targeted support for pensions would exist between current guidance-based services and more bespoke advice to help more consumers make effective, timely and properly informed decisions about their pensions.
It said there was a particular need for support in relation to pensions, with automatic enrolment significantly increasing the number of defined contribution pensions. In tandem, the introduction of pension freedoms has increased the volume and complexity of choices for consumers about how to use their DC pension savings through retirement.
However, as the FCA’s consultation on the proposals closes (13th February), Aegon has urged the watchdog to keep the new regulations flexible.
Steven Cameron, pensions director at Aegon, said: “After years of an ever-growing advice gap, it’s vital that the FCA’s proposals around targeted support achieve their full potential. With targeted support almost within our grasp, we’re keen the FCA retains as much flexibility in regulations as possible. This will allow the industry to innovate and to meet changing consumer support needs.
“We’re continuing to call on the FCA to allow adviser firms and not just pension and investment providers to apply for the necessary regulatory permissions, with fast-track approval for existing regulated firms.
“Within an outcomes-based approach, we’d welcome the FCA offering examples to illustrate the potential scope. This could set out possible scenarios, customer segments and ready-made solutions to encourage the industry to come up with innovative services.”
Cameron said it will be essential that the Financial Ombudsman Service offers “concrete assurances” over how it will differentiate between its expectations for full advice and for the less personalised suggestions from targeted support.
Steven Levin, CEO of Quilter, described targeted support as a “crucial step” towards closing the advice gap.
He explained: “To ensure its success, targeted support must be flexible and responsive to consumer needs. Firms should have the ability to define scenarios, consumer segments, and ready-made solutions at a firm level, allowing them to tailor support in a way that works for their clients.
“While regulatory guidance is important, overly prescriptive rules risk stifling innovation and making the framework too rigid to adapt to real-world consumer challenges. The ability to test and refine targeted support approaches in collaboration with the FCA and FOS will be key to ensuring they remain effective over time.”
Levin said consumer protection must be at the heart of the framework, with targeted support only to be provided by firms with the appropriate regulatory authorisation, preventing bad actors from exploiting the system.
He continued: “Financial advisers should also play a role in delivering targeted support, provided they have the scale and resources to help consumers make informed financial choices. However, it is important to distinguish between targeted support and holistic financial advice. The new framework should focus on helping those who would otherwise struggle to access support.”
In addition, Levin said firms must have the flexibility to establish their own charging structures, with affordability a key issue.
“If upfront fees are mandated, many of the people who stand to benefit most from targeted support may be discouraged from using it altogether. Ensuring that the framework is commercially viable for firms while remaining accessible for consumers will be critical to its success.
“Ultimately, targeted support will be most effective when combined with other initiatives, such as simplified advice and holistic advice, creating a full spectrum of support for consumers. No single solution will close the advice gap entirely, but this initiative represents a positive step forward in ensuring that more people have access to the support they need at different stages of their financial journey,” he added.
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