The FCA has proposed new measures to provide millions of UK savers with additional support, enabling them to make better-informed decisions about their pensions.

As part of an ongoing review of the boundary between investment advice and guidance, the FCA aims to ensure consumers are better equipped to make informed decisions. This initiative supports healthier capital markets and promotes growth by helping individuals access advice and guidance across all areas of their financial lives.

Currently, over 16 million people in the UK save for retirement through defined contribution pension schemes. However, the Financial Lives Survey 2024 reveals:

• 75% of consumers over 45 lack a clear plan for accessing their pensions or are unaware they need to make such decisions.
• Engagement with and understanding of pensions remains low.
• Only 9% of adults have sought regulated financial advice in the past year.
• Many people avoid addressing their pension situation due to the “Ostrich effect,” fearing their savings may be insufficient for retirement.

This lack of support leaves many individuals struggling to make critical choices about saving, investing, and managing their life savings effectively.

Bridging the Gap Between Advice and Guidance

To address these challenges, the FCA has outlined ways to close the gap between bespoke financial advice and general guidance, including free resources like MoneyHelper and support provided by financial firms.

The proposals include offering targeted support, enabling firms to assist consumers in specific scenarios, such as:

• Identifying when a consumer is withdrawing pension funds unsustainably.
• Helping those uncertain about how to access retirement income.

Targeted support would allow firms to provide tailored suggestions to groups with shared characteristics, free of charge.

Looking ahead, the FCA plans to extend its approach to introduce concepts of targeted support and simplified advice for other retail investments in 2025.

A Call for Feedback and Reform

This reform marks a pivotal moment, setting regulatory standards for years to come. The FCA invites feedback from stakeholders on its proposals, with comments due by mid-February 2025.

Sarah Pritchard, Executive Director of Consumers, Competition, and International at the FCA, emphasized:
“We want people to access affordable help, guidance, and advice when they need it to make informed decisions. By reviewing the boundary between guidance and advice, we’re starting with pensions, an area many find particularly challenging.

Getting this right means consumers will receive better support, potentially leading to increased investment and economic growth.”

Exploring Broader Changes

The FCA is also seeking input on additional areas of its regulatory framework that may require changes to better support consumers. This includes exploring:

• The use of digital tools.
• Consolidating pension pots.
• Rules surrounding Self-Invested Personal Pensions (SIPPs).

Through a discussion paper, the FCA welcomes views on these potential reforms, aiming to enhance consumer support and improve overall financial well-being.