The FCA opened a consultation this morning into the provision of default funds for non-workplace pensions requiring them to offer default option.
The FCA proposes that non-workplace pension providers provide a ‘default’ investment option to new non-advised customers and issue cash warnings to customers who have sustained and potentially inappropriate cash levels in their non-workplace pension.
The proposals will primarily be of interest to non-workplace pension providers, such as life insurers, platform providers, and self-invested personal pension operators. Other stakeholders with an interest in non-workplace pensions, such as industry associations and trade bodies, independent governance bodies, asset management firms, individuals and firms providing advice and information in these areas, consumer representative groups and charities, and other organisations with a particular interest in the ageing population, should be aware of the proposals.
The regulator said: “Currently, consumers buying and saving into a non-workplace pension have to choose their own investments from an increasingly wide range of options. This complexity can make it hard for some consumers who do not take advice to choose investments that meet their retirement needs. They may end up with investments that are not appropriately diversified and with too much or too little risk. In addition, more consumers are now buying non-workplace pensions without advice.
“As well as poorly chosen baskets of investments, we are concerned that some consumers hold cash in their non-workplace pension. Over the long term, cash holdings are at risk of being eroded by inflation. Investing in growth assets rather than cash is likely to deliver a larger pension pot at retirement.”
Interactive Investor head of pensions and savings Becky O’Connor says: “It’s really important that investors who want to do it themselves feel free to do so, while those that need a helping hand can access this, too.”
“You don’t have to be an investment whizz to use a Self-invested Personal Pension. Interactive investor offers a range of six ‘Quick-start’ funds, which are low cost, ready-made investment portfolios, including three ethical options, based on different risk levels and giving a choice of active or passive strategies, which pension investors can use.
“It is true that there is a huge choice of funds, trusts, ETFs and direct equities out there for those who want to make their own choices. Investors can also face choices between different asset classes, geographies and themes. That’s why access to good research and education is so important. For some confident investors, this ability to make their own informed choices, based on their own goals and timeframes, is the appeal of a Sipp.
“On the risk of cash, generally speaking, Sipp investors do not hoard cash. They hold a slightly higher proportion than ISA and trading account customers on interactive investor. They can hold cash for a variety of reasons, for example, taking opportunities in the market.”
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