The Financial Conduct Authority (FCA) has determined that investment pathways introduced in February 2021 for consumers entering drawdown without taking advice are “working as intended” but more needs to be done to assist people in making decisions.
The FCA has published its post-implementation review of investment pathways with the review comprising of analysis of market trends in the pensions sector, research on the uptake and operation of investment pathways, analysis of publicly accessible industry data, and qualitative responses to the DWP’s request for evidence on the subject of assisting savers in understanding their pension options.
Investment pathways were introduced primarily to address specific issues identified in the Retirement Outcomes Review (ROR). This includes assisting non-advised drawdown customers who find it difficult to choose an investing strategy and customers who want to access their tax-free funds. The FCA says that some of these providers were “defaulting” customers into cash or assets that resemble cash.
The FCA says it wanted to make sure consumers who are entering drawdown only invested primarily in cash if they take an active decision to do so. Additionally, the FCA required that businesses notify consumers who have accessed their pensions annually of all the fees and levies they have paid in the previous year.
The FCA says that it recognises that more needs to be done to assist customers in making decisions and that there has to be a comprehensive approach to helping consumers at every stage of their journey. It also adds that it intends to collaborate closely with the DWP and The Pensions Regulator (TPR) to ensure alignment, as relevant, within the pensions market.
The FCA adds that the collaboration aims to advance its thoughts and regulatory initiatives in this field, which encompasses the ongoing review of the advice/guidance boundary in conjunction with the Treasury.
The post-implementation review comes after the Department for Work and Pensions (DWP) response to the request for evidence on “helping savers understand their pension choices” about the products and services section. This consultation will also cover a policy framework to “support individuals use their pension savings in decumulation.”
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