The Financial Conduct Authority (FCA) recently proposed a new framework for free pension support targeting 16+ million UK savers. This "targeted support" would fill the gap between full financial advice and basic guidance. The plan addresses growing concerns as 75% of individuals over 45 lack clear pension drawdown plans. Pension providers could offer personalized suggestions based on specific consumer scenarios. Final rules are expected by summer 2025 after regulatory review and consultation.
Millions of UK pension savers could soon receive free help with their retirement planning. The Financial Conduct Authority (FCA) released a consultation paper on December 12, 2024, proposing a new "targeted support" framework to help people make better pension decisions.
The proposal aims to bridge the gap between full financial advice and basic guidance. It would allow pension providers to give personalized suggestions to specific consumer groups without charging fees. The FCA's plan targets the 16+ million UK savers with defined contribution pension schemes.
Research shows 75% of people over 45 don't have a clear plan for their pension drawdown. This problem has grown since pension freedoms gave people more choices about accessing their retirement savings. As defined benefit pensions become less common, individuals now bear more responsibility for managing their retirement income. Retirees over 70 may combine this support with Pension Credit benefits for enhanced financial security during retirement.
Under the proposed framework, pension providers could help customers with specific challenges, like unsustainable pension withdrawals or uncertainty about retirement income options. Companies would need to design pre-defined scenarios and solutions for different customer segments.
The FCA expects the targeted support to be provided free of charge to consumers. Firms might recover costs through cross-subsidization within their business models. Before making suggestions, companies would need access to relevant consumer data.
The regulator's Consumer Duty principles would apply to this new support category. Firms would need to clearly distinguish targeted support from financial advice and show evidence of creating "better outcomes" for their customers. Only 9% of UK adults received full regulated advice in the past year, highlighting the significant gap this initiative aims to address. The consultation paper CP24/27 focuses specifically on targeted support reforms for pensions at this stage.
The consultation on these proposals is open until February 13, 2025. Final rules are expected by summer 2025, with implementation to follow after regulatory approval. The FCA is also planning a consultation on retail investments in the first half of 2025.
The regulator will work with the Department for Work and Pensions and The Pensions Regulator to guarantee the new framework also works for trust-based pension schemes. Ongoing monitoring will evaluate how effective the targeted support becomes.
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