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FCA sets out problems of post-pension freedoms market

Regulator finds proportion of savers moving into non-advised drawdown has gone from 5 per cent to 30 per cent

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The FCA has highlighted the emerging problems stemming from pension freedoms with many savers abandoning their pension, record numbers moving into non-advised drawdown and an overall lack of product innovation.

In its retirement outcomes review, published today, the regulator says while the pensions market since the reforms is still evolving, there are issues building up that may warrant FCA intervention.

It found over half of the fully withdrawn pension pots were not spent but transferred into other savings or investments. The FCA attributes this in part to a general mistrust of pensions, but says this could lead to consumers paying too much tax or missing out on investment growth.

The regulator raises concerns about the proportion of savers going into non-advised drawdown moving from 5 per cent to 30 per cent since the reforms were introduced.
It has also warned the number of annuity providers pulling out of the open market is hitting competition, and of limited product innovation.
FCA executive director of strategy and competition Christopher Woolard says: “We have identified areas where early intervention may be needed either now or further down the track to put the market on the best footing for the future.

“Ensuring this market works well will require cooperation across Government, regulators, the industry and consumer bodies.

“We will work closely with stakeholders to make sure we are clear on the actions we are best placed to lead.”



Gregg McClymont: Managing risk in the pension freedoms age

Revolution is an over-used word but, in the case of pension freedoms, it is necessary. The consequences of ending de-facto compulsory annuitisation in the mass retirement market will be felt for decades to come. Such is the nature of revolutions. This does mean a final judgment on pension freedoms’ success or otherwise remains some time […]

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Kim North: The risks of advising against DB transfers

Never before has the need for clarity in investments been as important than it is these days. A huge wall of money is being transferred from defined benefit pension schemes looking for place to be invested in drawdown investments. With the FCA removing the guidance that a DB transfer is unsuitable, but needs to be […]


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. “Ensuring this market works well will require cooperation across Government, regulators, the industry and consumer bodies.”

    True but about as likely as winning the lottery without a ticket.


    Politics decided to give consumers a choice and that means they can make bad decisions that affect their lives. That’s the price of choice and you can’t legislate or create rules to stop that. But politicians want someone else to blame when it does go wrong…

    The regulator thinks it can manipulate the market and that human beings won’t act like human beings if there are rules to prevent it. With emerging risks it’s also reactive and too sensitive to getting things wrong to the point of paralysis. This manifests in long periods of talk and no effective, timely action. This only works to set up others, whether it be banks, asset companies or advisers, to take the hit later…

    The ‘industry’ is a commercial animal, if you reduce or take away commercial incentive (by rules, guidance or invective) you won’t get the products and services, and competition will shrink. Most in the ‘industry’ understand that it makes economic sense to look after their customers at the same time as having a business to run…

    Consumer bodies will only ever do what they think is good for consumers (sometimes right, sometimes wrong) and don’t give a fig about anything else. Co-operation is the antithesis of how they operate.

    Which doesn’t bode well. Of course, it’s a shame none of this was foreseeable…

  2. So what does the FCA propose? Forcing consumers to take advice even though legislation now allows them to make their own choices, for better or for worse, as to what they do with their pension benefits/funds?

    Either make OM the default option, with the cost of advice met by way of the Advice Allowance, or compel providers to include with their pre-retirement packs a big, bold, brightly coloured leaflet urging the recipient to take advice. Perhaps they all do that already, I’ve not seen a copy of one for a few months. Then again, you can lead a horse to water…

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