The FCA has published a policy statement introducing ‘investment pathways’ for consumers with pension savings who enter drawdown without taking advice.
In 2018, the FCA published the final report of its Retirement Outcomes Review, an investigation into how the pensions and retirement income sector has been working since the pension freedoms were introduced in 2015. It then ran two consultations on a proposed package of remedies.
The new policy statement sets out the final rules and guidance in relation to the second consultation. The key points are that drawdown providers must:
- offer non-advised consumers investment pathways – this involves presenting the consumer with options for how they might want to use their drawdown pot, such as “I plan to start taking my money as a long-term income within the next 5 years”
- ensure that non-advised consumers entering drawdown invest wholly or predominantly in cash only if they have taken an active decision to do so (they must also give warnings to those consumers who decide to invest in cash, as well as those already in cash)
- give information on an annual basis to consumers who have accessed their pension, setting out the costs and charges they have paid expressed as a single pounds and pence figure.
The FCA’s final rules and guidance in relation to the first consultation, published in January 2019, covered ‘wake-up’ packs, information for consumers about annuities, and changes to make the cost of drawdown products clearer and more comparable for consumers.