In June 2016, the FCA launched its retirement outcomes review (ROR). The regulator wanted to assess how the retirement income market was evolving following the introduction of the pension freedoms, to address any emerging issues that might cause consumer harm and put the market on a good footing for the future.
In June 2018, the FCA issued its ROR final report and published a consultation (Consultation Paper 18/17 – Retirement Outcomes Review: Proposed changes to our rules and guidance (CP18/17)) setting out proposed remedies in response to the ROR findings. CP18/17 set out proposed changes to protect consumers from poor outcomes, improve consumer engagement with retirement income decisions and promote competition
On 28 January 2019 the FCA published:
- Policy Statement 19/1: Retirement outcomes review – feedback on CP18/17 and our final rules and guidance (PS19/1); and
- Consultation Paper 19/5: Retirement outcomes review – investment pathways and other proposed changes to our rules and guidance (CP19/5).
In PS19/1 the FCA sets out its new rules and guidance on the first package of remedies from the ROR following CP18/17. The FCA is introducing rules and guidance aimed at improving consumer engagement with their retirement income decisions, and promoting competition by making the cost of drawdown products clearer and comparisons easier. The new rules and guidance cover:
- information which is sent to consumers before they decide how to access their pension savings, including ‘wake-up’ packs, ‘wake-up’ pack reminders and additional retirement risk warnings;
- information provided to consumers about annuities and eligibility for enhanced annuities; and
- changes to make the cost of drawdown products clearer and more comparable.In CP19/5 the FCA is consulting on:
The changes to ‘wake-up’ packs, retirement risk warnings and reminders changes, and the annuity information prompt will come into force on 1 November 2019. Changes to make the cost of drawdown products clearer and comparisons easier will come into force on 6 April 2020.
In CP19/5 the FCA is consulting on:
- investment pathways. The FCA is seeking feedback on proposals to require drawdown providers to offer non-advised consumers a range of investment solutions – with choice options – to help consumers choose investments that broadly meet their objectives;
- ensuring investment in cash is an active choice. The FCA is seeking feedback on proposals to require drawdown providers to ensure that consumers invest in cash only if they make an active decision to do so. The FCA proposes that these providers must also give consumers warnings about the likely impact of investing in cash on their long-term income, both when they enter drawdown (or transfer funds already in drawdown into a new product) and on an ongoing basis; and
- actual charges information. The FCA is seeking feedback on proposals to require firms to tell customers beginning to draw on their pension how much they had actually paid in charges over the previous year, in pounds and pence and inclusive of transaction costs.
The deadline for comments on CP19/5 is 5 April 2019. Final rules are expected in July 2019.