The Financial Conduct Authority (FCA) has set out proposals for extra support for millions of UK savers to help them make better decisions about their pensions. The FCA’s statement, which is released today, is shown below:

This is part of a wider review of how the boundary between advice and guidance on investments operates, which is underway to help make sure consumers are better supported. 

Making sure consumers can make informed investment decisions is an important part of ensuring healthy capital markets which deliver growth. The FCA aims to help people have access to more help, guidance and advice across all aspects of their financial lives.  

More than 16 million people in the UK save for their retirement into defined contribution pension schemes.   

However, 75% of consumers, aged over 45, do not have a clear plan for how to take money from their pension or didn’t know they had to make a choice. (Financial Lives survey, 2024). FCA consumer research shows: 

• engagement by consumers with and understanding of pensions is low.  
• the vast majority of consumers are ill-equipped to manage complex pension decisions confidently as only 9% of adults have taken full regulated advice in the last 12 months (Financial Lives Survey, 2024). 
• some people are disengaged because they fear knowing the reality of their pension pots – the so-called Ostrich effect – worrying about whether their pension will be sufficient in retirement. 

Most people still lack the support needed to make critical choices about their pensions. Decisions on saving, investing and how to use their life savings are critically important, and some may struggle to make the right choice for them without help. 

Now the FCA has set out ways to tackle the gap that exists between bespoke financial advice and guidance – examples of existing guidance being information provided for free through MoneyHelper, as well as by firms. 

Targeted support would 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 a bespoke suggestion to specific groups of consumers who share the same characteristics. The FCA is suggesting that targeted support is provided for free. 

The FCA will follow with further proposals on introducing concepts of targeted support and simplified advice for other retail investments next year. 

This is a significant moment as the reform to the regulatory framework will set the standards for years ahead. The FCA encourages feedback from all stakeholders about the proposals and views are sought 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. So, we are reviewing the boundary between guidance and advice across investments. 

“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.” 

Alongside this, the FCA is 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. 

Through a separate discussion paper the FCA is seeking views on whether further changes might be needed to better support consumers such as the use of digital tools, consolidation of pension pots and the rules around Self-Invested Personal Pensions (SIPPs).  

Commenting on the FCA’s Consultation Paper 24/27 on proposed targeted support reforms for Pensions, Steven Cameron, Pensions Director at Aegon said:

“The FCA’s latest consultation on Targeted Support reforms for pensions is the most exciting chapter yet in the long-running Advice Guidance Boundary Review saga.

“While there’s much detail to thrash out, Targeted Support could herald a ‘new dawn’, bringing huge benefit to the millions of auto-enrolees who regrettably won’t consider advice but who are crying out for help.

“Many auto-enrolees share what the FCA calls ‘common characteristics’ of not paying sufficient contributions to deliver an adequate retirement income. Others will never have considered investment options outside their default fund.

“The potential benefits are arguably even greater when it comes to making decisions around when and how to take a retirement income. Here, giving the consumer more confidence to make well-informed decisions with an understanding of the risks has to be a good thing.

“We’re pleased to see the FCA structuring its proposals primarily around the outcomes-based Consumer Duty, proposing further rules or guidance only where required to offer firms clarity or to ensure consumer protection.

“There’s major scope for firms to consider under which scenarios Targeted Support could offer ‘ready-made solutions’ to drive better outcomes, for identified customer segments, defined with appropriate granularity.

“It’s critical that consumers are made fully aware that Targeted Support will not deliver the value add of holistic financial advice, or offer a personal recommendation. But as well as being open to manufacturers, we strongly believe adviser firms should be given the option to design their own Targeted Support solutions alongside holistic advice should they identify a customer benefit.”

Tom McPhail, Director of public affairs at the lang cat said: “These proposals from the FCA are revolutionary in making a significant and meaningful change to how firms can communicate with customers and, as a result, could help reduce the Advice Gap which we recently identified as affecting 91% of the UK population. This is also apparent from their strong steer, although not an actual requirement, that targeted support should be free at the point of use. We have to be careful here not to create a new market that only the largest firms are able to operate in but I’m sure the FCA with their competition objective will be fully aware of this risk.

“There is also a risk with the proposals, which the FCA appears comfortable with, that in allowing firms to use language with customers such as ‘we suggest <a particular product solution>, based on this being appropriate for people in similar circumstances to you’ could result in customers believing they have received advice when they have not.

“So we welcome these proposals and the FCA’s boldness is trying to help savers achieve better financial outcomes, however the solution is by no means risk free; effective customer communication and disclosures will be essential to mitigate this risk.”

James Carter, Head of Platform Product Policy, Fidelity International comments: “Today’s proposals to move forward with providing pension savers with targeted support are a welcome step towards improving the support offered to consumers needing to make some of the most complex financial decisions.

“Of the proposals the FCA made through its review, we believe that targeted support has the most potential to address the issues which have been identified.  It will allow firms to target messages at groups of consumers in an impactful way to better enable them to avoid a wide range of foreseeable harms, for example unsustainable withdrawals. We believe that this is the critical measure to mitigating the advice gap.

“As the FCA noted in its recent Advice Guidance Boundary Review update, automatic enrolment has significantly increased membership of defined contribution (DC) pension schemes – however many people only engage with their savings as they approach retirement. The FCA’s proposals will create a framework through which the financial services industry is able to offer greater assistance to savers as they face these important decisions.”

Commenting on the FCA’s statement, Stuart Ritchie, GSB Wealth Partner, said:

“I believe these FCA proposals are 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.

“While financial planners provide an extremely valuable service, I am well aware that advice often reaches those who are relatively well off, with less than 10 percent 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.”

Alastair Black, head of savings policy at abrdn adviser, said: “The advice gap has long been one of the most pressing challenges in UK financial services, and we welcome the FCA maintaining momentum to tackle it. The launch of this consultation signals a genuine commitment to delivering real solutions, and we’re encouraged to see the regulator zone in on pensions as an initial focus – an area where the need for support is arguably the greatest.

“While full financial advice should deliver the best outcomes, we recognise that many people simply can’t access it. This is where the introduction of targeted support is such a key step. It will give consumers the tools and confidence to make critical financial decisions, especially around pensions, and avoid making costly mistakes.

“That said, we anticipate that as consumers engage with this support, they will soon realise how complex some of these decisions really are. And when that happens, we expect to see a rise in demand for full financial advice. With this in mind it is great that the FCA is also looking at “simplified advice”. This two-pronged approach could be the key to truly closing the advice gap and helping people make more informed, confident decisions about their futures.”