FCA CP19/5 Retirement outcomes review - Which? response

Summary: 

• Which? welcomes the opportunity to respond to this consultation. We broadly support the FCA’s proposals for ‘investment pathways’ which will introduce a simple choice architecture to help non-advised consumers make more informed decisions about investing their pensions savings. However, we outline in our response the changes the FCA should make to their current proposal in order to address our concerns about the pathway requirements and ensure consumers are protected if they do not engage with their savings.
• Which? welcomes the fact that the FCA intends to extend the IndependentGovernance Committees (IGCs) regime to provide oversight of investment pathways. As part of this the FCA also should commit to a wider review of the effectiveness of IGCs and work with the TPR and DWP to ensure a consistently highstandard of governance across the entire pensions and retirement income sector.
• Which? supports the proposals to require consumers to make an active decision to invest in products that are predominantly cash and for firms to be required to explain to consumers the risks of investing in cash or cash-like products before they make a decision to invest.
• Which? supports the proposal that providers of pension schemes should provide consumers in decumulation with annual information on all the costs and charges that the consumer has paid on their pension pot and that this information should be aggregated and provided in pounds and pence to help consumer understanding
• While all these remedies are welcome, it is essential that non-advised consumers accessing drawdown product, in particular those consumers using the investment pathways, are protected by a charges cap. The proposals in this consultation will not be enough to protect consumers from high charges in a market with such weak competition.