Millions of people could get more support with their pensions under new proposals

This is part of a wider review of how the boundary between advice and guidance on investments operates, which is underway to help make sure consumers are better supported.

Making sure consumers can make informed investment decisions is an important part of ensuring healthy capital markets which deliver growth. The FCA aims to help people have access to more help, guidance and advice across all aspects of their financial lives.

More than 16 million people in the UK save for their retirement into defined contribution pension schemes.

However, 75% of consumers, aged over 45, do not have a clear plan for how to take money from their pension or didn’t know they had to make a choice (Financial Lives survey, 2024). FCA consumer research shows:

• engagement by consumers with and understanding of pensions is low
• the vast majority of consumers are ill-equipped to manage complex pension decisions confidently as only 9% of adults have taken full regulated advice in the last 12 months (Financial Lives Survey, 2024)
• some people are disengaged because they fear knowing the reality of their pension pots - the so-called Ostrich effect - worrying about whether their pension will be sufficient in retirement

Most people still lack the support needed to make critical choices about their pensions. Decisions on saving, investing and how to use their life savings are critically important, and some may struggle to make the right choice for them without help.

Now the FCA has set out ways to tackle the gap[2] that exists between bespoke financial advice and guidance – examples of existing guidance being information provided for free through MoneyHelper[3], as well as by firms.

Targeted support would allow firms to provide support to consumers in different scenarios, for example, if they identify someone is drawing down on their pension unsustainably, or where a consumer is facing uncertainty about how to take a retirement income. Firms would be able to provide a bespoke suggestion to specific groups of consumers who share the same characteristics. The FCA is suggesting that targeted support is provided for free.

The FCA will follow with further proposals on introducing concepts of targeted support and simplified advice for other retail investments next year.

This is a significant moment as the reform to the regulatory framework will set the standards for years ahead. The FCA encourages feedback from all stakeholders about the proposals and views are sought by mid-February 2025.

Sarah Pritchard, executive director of consumers, competition and international, at the FCA, said:

'We want people to have access to the help, guidance and advice that they need, at a cost they can afford, when they need it, so that they can make informed decisions. So, we are reviewing the boundary between guidance and advice across investments.

'We know people find pensions particularly difficult to understand, so we are deliberately starting with this to help consumers with their pension decisions.

'If we get this right, consumers will be better supported in making financial decisions. This will potentially lead to more people investing, which will help provide capital necessary to stimulate economic growth.'

Alongside this, the FCA is seeking views on whether there are any other specific areas of its regulatory framework which may need to change to enable firms to better support consumers.

Through a separate discussion paper[4] the FCA is seeking views on whether further changes might be needed to better support consumers, such as the use of digital tools, consolidation of pension pots and the rules around Self-Invested Personal Pensions (SIPPs).

Notes to editors

1. In 2022, the Government announced plans to fundamentally review how the boundary between advice and guidance on investments is operating. This Advice Guidance Boundary Review (AGBR) is being carried out by the FCA, in conjunction with the Treasury. 
2. The review aims to ensure that consumers get the help they want, at the time they need it, and at a cost that is affordable, to help them make informed decisions in relation to their pensions and retail investments.
3. In August 2023, the FCA published clarification for firms[5] who want to support consumers more under the existing framework, without providing a personal recommendation.
4. In December 2023, the FCA and the Treasury published a policy paper (PDF)[6] with initial proposals for closing the advice gap. 
5. Read the Consultation Paper, CP24/27: Advice Guidance Boundary Review – proposed targeted support reforms for pensions[2].
6. Read the consumer research paper, Advice Guidance Boundary Review Targeted Support for Non-Advised Defined Contribution Pensions (PDF)[7].
7. Read the Discussion Paper, DP24/3: Pensions: Adapting our requirements for a changing market[4].
8. As part of the review, the FCA is also developing proposals for targeted support in relation to investments, and we plan to consult on draft rules across pensions and investments in 2025. Read more in our update published on 15 November 2024[8].
9. These proposals support the FCA’s consumer investments strategy and vision[9] for the market which is for consumers to be able to invest with confidence. The FCA has published a 2-year update on its strategy[10] alongside a data review[11] of its work to tackle harm in the market in 2022/23.
10. The FCA also ran field trials to explore effective touchpoints for engaging consumers with their pension. See the research article: Testing what gets consumers engaged with their pension – and why[12].