FCA announces review into retirement income advice
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by Rob Langston
The Financial Conduct Authority has launched a review of the retirement income advice industry to find out how financial advisers are delivering advice and to assess the quality of the outcomes for consumers.
A review was previously planned (‘Assessing Suitability Review 2’) but paused to allow the regulator to concentrate its resources on its response to the Covid pandemic.
The review was prompted by the introduction of the pension freedom reforms in 2015 and the greater complexity that has emerged in this space.
“Given the wider range of retirement options available, it is vital that consumers get good advice at the point they first access their pension savings and, where relevant, on an ongoing basis,” it said.
The FCA said the findings would help inform its future strategy for the sector and will also be a key indicator of how firms implement the Consumer Duty which was introduced last year.
The regulator will contact firms selected for review early in 2023 and will also engage with industry trade bodies before reporting its findings in Q4.
The regular will link the review to its work on lifetime mortgages it committed to in its 2022/23 Business Plan to get a clearer understanding of outcomes for consumers in later life.
Uncertainty over retirement income
Jon Greer, head of retirement policy at wealth manager Quilter, said although the pension freedoms had given people more choice and flexibility in retirement, they had also made the landscape more complex.
He said: “Planning your retirement is one of the most important decisions of your lifetime, and financial advisers have a hugely important role to play in helping people make the best of their pension savings and ultimately access the best possible retirement.
“Making the wrong choice could make the difference between someone enjoying a fulfilling retirement and one where they are struggling to make ends meet.”
The FCA’s review also comes as M&G Wealth – the advisory arm of asset manager M&G – highlighted the importance of retirement advice after revealing that one-third of adults do not know how they will make up any shortfall in income to fund a comfortable retirement.
According to M&G Wealth’s Retirement Revisited Report, only 35% of respondents were confident that their plans would allow them to retire comfortably.
Catriona McInally, investment expert at M&G Wealth, said: “Rising inflation rates, and the cost-of-living crisis, have undoubtedly added pressures surrounding people’s retirement plans and funding more immediate spending needs is understandably the focus for many right now.”
