Customers are going into non-advised drawdown regardless of the options communicated to them, according to the findings of a review by the FCA published today.
The regulator assessed a sample of non-advised drawdown sales by firms covering approximately 74 per cent of the market by sales volume for the period from April 2015 to April 2017.
This included life insurers and Sipp operators and looked at all forms of communication with customers, including written, telephone and online.
Drawdown sales are now twice as high as annuity sales, with 37 per cent of drawdown sales made without advice.
The FCA notes firms are offering online tools and calculators to help customers make informed decisions.
However, it found some customers do not fully engage with the information and are therefore potentially putting themselves at risk of harm.
The findings will also inform the FCA’s Retirement Outcomes Review, which will be published during the first half of 2018.
These findings and the Retirement Outcomes Review final report will also inform the FCA and The Pensions Regulator’s joint strategic approach to the pensions and retirement income sector, due to be published later this year.
Royal London director of policy Steve Webb says: “The FCA’s research reinforces the value of taking financial advice when making key at-retirement decisions.
“Too many unadvised consumers are not engaging with the information which providers send them because they have already made up their mind what they want to do.
“In addition, many are very focused on accessing their tax-free cash and give relatively little attention to where the rest of their money goes, often leaving it in low-return cash investments.”
Webb adds: “There may be a case for reviewing whether people should be able to access tax free cash and leave the rest invested so that they do not lose out on future investment growth.
“We also need to make sure that people get wake-up packs and other information much sooner, rather than after they have made up their minds.”