Following the statement released by the FCA this evening, with proposals for extra support for millions of UK savers to help them make better decisions about their pensions, Tom Selby, director of public policy at AJ Bell, comments:
“Ensuring people can access the help and support they need, either through regulated advice or guidance, is critical to building financial resilience in the UK. The existing regulatory framework makes it difficult for firms to offer anything beyond relatively basic information to non-advised customers without risking straying over the boundary from guidance to advice.
“This means millions of people who don’t take regulated advice are essentially left to make often complex retirement decisions on an island, without receiving the help they need. The fact three-quarters of over-45s have no clear plan about how to take money from their retirement pot demonstrates just how vital it is that guidance is improved. The temptation to stick your head in the sand when it comes to pensions – the so-called ‘Ostrich effect’ – risks leaving millions of Brits facing a disastrous income shortfall when they reach retirement.
“Regulated advice remains the gold standard but the proposal to create a new ‘Targeted Support’ regime allowing more personal help to be provided for free could be a gamechanger for consumers, potentially helping millions of savers make better-informed decisions about their finances. The regulator has identified millions of people with investible assets who are crying out for help making decisions, but many cannot afford advice or prefer to manage their own investments on a DIY basis.
“It is therefore vital those who do not receive advice still get the help they need. The FCA and Treasury deserve credit for tackling this difficult problem head-on and exploring solutions to both improve guidance and make advice more accessible.
Targeted Support must be flexible
“The goal of Targeted Support should be ensuring as many people as possible can benefit from better quality, more personal guidance about their finances. The higher regulatory standard set by Consumer Duty and the substantial requirements to monitor and review consumer outcomes under the Duty will provide protection against the risk of consumer harm.
“We welcome the fact the FCA is not being overly prescriptive in its approach to Targeted Support. Firms need the flexibility to design interventions using knowledge of their customers, rather than based on a broad-brush approach dictated across all businesses. Taking a less prescriptive, outcomes-based approach should free firms up to innovate in ways that best suit their customer base.
“It is vital any new Targeted Support regime can be implemented as simply as possible across a firm’s entire customer base. It is important that, from a customer’s perspective, Targeted Support is simply seen as normal and embedded within existing consumer journeys, rather than being a distinct, separate offering, which may lead to confusion. Ultimately, the aim should be to shift the guidance boundary to a more sensible place. The Consumer Duty should be the regulatory standard against which firms’ Targeted Support interventions are measured.”
