Do customers need simpler pension choices? Last month’s Retirement Outcomes Review saw the FCA calling on providers to simplify retirement choices, improve customer engagements and most interestingly to establish drawdown “investment pathways”.
The FCA suggests that these pathways would be ready-made options, designed to enable consumers to either take the money over a short period, take money as an income in retirement or stay invested for a longer period of time with only occasional withdrawals. Three years on from the pension freedom reforms that made many of the current invest-and-drawdown schemes possible, the FCA is concerned about the value for money in drawdown, especially the significant variance in charges which are sometimes complex and difficult to compare. The FCA plans to force firms to show a straightforward one-year charge figure in pounds and pence in the key features illustration they provide customers. They also made it clear that they have “not ruled out” bringing in a cap on drawdown charges and hinted that this might be used against firms that don’t introduce investment pathways.
The FCA’s research shows one-third of drawdown consumers 100% invested in cash, and they believe half of those are likely to suffer on income in retirement. The new rules would force consumers to take an active choice before being placed into cash. They also found that as many as 60% of consumers had not taken any advice about drawdown and were not sure about where their money was invested and that customers could be receiving up to 37% more retirement income by investing in a different mix of financial assets rather than cash.
If this creates a new area for customer complaints or remediation, Kind Consultancy is perfectly positioned to supply you with both interim and permanent resources with extensive experience and expert-level knowledge in this area. Contact us on 0121 643 2100 or e-mail email@example.com.