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Pensioners would be able to receive “targeted support” from companies without it being considered fully regulated financial advice, under proposals from Britain’s financial watchdog.
The plans, to be announced on Thursday, are part of the Financial Conduct Authority’s efforts to fill a gap in the market for affordable financial guidance.
The FCA said new rules on pension support would allow firms to make general offers to similar groups of consumers under a lighter regulatory framework.
The watchdog group said it hoped introducing “commensurate standards” for the provision of targeted support would encourage more businesses to start offering support at low or no cost. .
“New forms of regulated or targeted support will help more consumers make informed decisions and help them get the support they need, when they need it. We believe this will enable us to achieve better results,” the report said.
Although this proposal comes with “the trade-off that individual consumers may not achieve the best possible outcomes with targeted support,” it still “ensures scalable service delivery.” “It is necessary for this to happen,” he added.
Sarah Pritchard, executive director of the FCA, said: “This will bridge the gap that currently exists between more tailored advice and the general support available.”
Officials also hope this will avoid more people turning to so-called “finfluencers,” social media celebrities who offer financial advice without regulatory approval. .
The watchdog appears to be particularly concerned that large numbers of people are withdrawing cash from their pensions at “unsustainable” interest rates or with negative tax implications.
“Right now, many people are reporting that they don’t have the information they need to make confident decisions,” Pritchard said.
According to the FCA, just 9% of UK consumers received regulated financial advice in the year to May 2024.
It added that three-quarters of those surveyed “didn’t have a clear plan for how to draw down their pension or didn’t know they had to make a choice.”
The report found that two in five people in defined contribution plans do not know how much they or their employer contributes to their retirement savings; half of respondents added that they had not reviewed their pot value in the past year.
The FCA says firms want to offer further support to customers with their financial options, but are holding back due to concerns about departing from fully regulated financial advice, which is costly and subject to greater scrutiny. That’s what it means.
“They do so because of concerns about inadvertently crossing advice lines, concerns about economic viability at scale, and liability if the aid fails. “They are reluctant to do so,” the report said.
Ian McKenzie, chief operations and technology officer at St James’s Place, the UK’s largest asset management company, welcomed the proposal, saying: To receive advice. ”
He added that the “key to the success” of the offer was ensuring consumers understood that targeted support was not the same as financial advice.
The proposals are open for feedback until February 13 next year, and draft rules and guidance to provide targeted support for pensions and other consumer finance products will be developed next summer.
