The PLSA has published its response to the Financial Conduct Authority’s (FCA) Retirement Outcomes Review (ROR): proposed changes to our guidance consultation.
In its consultation response, the PLSA supports the FCA’s plan to introduce investment pathways as the right solution to protect savers going into drawdown without taking financial advice. However, the PLSA also believes that the customer journey through the pathways should enable savers to take a mixture of the options available. For instance, retirees may want to take some of their pot as cash and some as income.
The PLSA also states that the ROR proposals are the right regulatory package for the market at this time. However, as more people retire who have only larger defined contribution (DC) pots, we think the regulations will need to evolve to further protect those who don’t take advice.
Nigel Peaple, Director of Policy and Research, Pensions and Lifetime Savings Association (PLSA), said:
“We support the FCA’s proposed remedies for the decumulation market at this time. Pension freedoms have resulted in savers needing to make extremely complex decisions at retirement, but many do not take financial advice. It’s therefore right the regulator has consulted on investment pathways where providers would offer a small number of options to suit the majority of savers.
“However, we believe the proposal for pathways does need to change to more easily allow savers to take a blend of cash and income. The current proposal is not structured in this way and therefore wouldn’t meet all savers’ needs.
“Overall, the remedies should not be thought of as the end point for regulation of the market. We anticipate savers’ needs will change in the coming years – as stated in our recent Hitting the Target report – as defined contribution pots increase and defined benefit entitlement becomes a rarer commodity.”
The PLSA’s response also:
- States that the PLSA does not think that this is the end of regulatory changes for the decumulation market and that as people with larger DC pots come to market, the market will need to evolve to offer products that are more sophisticated.
- Welcomes the fact the FCA is proposing to retire the term “default” for decumulation as the term was often misused. This will enable conversations about how guiding people towards decisions at retirement can complement guidance and advice.
- Welcomes the introduction of investment pathways but concludes that the three selected are not the best options for retirees. Savers may want a blend of products, rather than just cash, drawdown or an annuity.
- Explains that offering savers a number of choices could result in them not choosing the best options for their needs and therefore how these choices are presented should be overseen by a fiduciary – such as a pension trustee – or an Independent Governance Committees (IGC).
- Suggests that the FCA keeps its rules and guidance under review as well as continuing to track savers’ needs through regular surveys of customer behaviour and pension provider activity.
Robyn Margetts, Head of Media and PR, Pensions and Lifetime Savings Association
T: 020 7601 1726, M: 07713 073023, E: [email protected]
Steven Kennedy, PR Manager, Pensions and Lifetime Savings Association
T: 020 7601 1737, M: 07713 073024, E: [email protected]
Kathryn Mortimer, Press Officer, Pensions and Lifetime Savings Association
T: 020 7601 1748, M: 07901 007 713, E: [email protected]