The 2015 pension freedoms give consumers more complicated choices to make about how to invest their pension savings, and when to draw on them. In 2016, The FCA launched the Retirement Outcomes Review to investigate how consumers and providers were responding to the pension freedoms.
Final rules and guidance on the first stage were published in January 2019 that covered ‘wake-up’ packs, information for consumers about annuities, and changes to make the cost of drawdown products clearer and more comparable for consumers.
Policy Statement PS19/21, published in July 2019 sets out a second phase of final rules and guidance. These rules will come into effect on 1 August 2020.
The new requirements are intended primarily to help non-advised drawdown consumers who struggle to make investment decisions. A secondary objective is to promote competition by making the actual charges paid by consumers clearer, and comparisons easier.
The new rules and guidance:
- introduce ‘investment pathways’ for consumers entering drawdown without taking advice
- ensure that consumers entering drawdown only invest mainly in cash if they take an active decision to do so
- require firms to send annual information on all the costs and charges paid over the previous year to consumers who have accessed their pension