The UK’s Financial Conduct Authority (FCA) has set out proposals for extra support for millions of UK savers “to help them make better decisions about their pensions”, with widespread broadly positive early reaction from across the industry.
This is part of a wider review of how the boundary between advice and guidance on investments operates, which is underway to help make sure consumers are better supported.
Making sure consumers can make informed investment decisions is an important part of ensuring healthy capital markets which deliver growth. The FCA aims to help people have access to more help, guidance and advice across all aspects of their financial lives.
More than 16 million people in the UK save for their retirement into defined contribution pension schemes.
However, 75% of consumers, aged over 45, do not have a clear plan for how to take money from their pension or didn’t know they had to make a choice. (Financial Lives survey, 2024). FCA consumer research shows:
• engagement by consumers with and understanding of pensions is low.
• the vast majority of consumers are ill-equipped to manage complex pension decisions confidently as only 9% of adults have taken full regulated advice in the last 12 months (Financial Lives Survey, 2024).
• some people are disengaged because they fear knowing the reality of their pension pots – the so-called Ostrich effect – worrying about whether their pension will be sufficient in retirement.
Most people still lack the support needed to make critical choices about their pensions. Decisions on saving, investing and how to use their life savings are critically important, and some may struggle to make the right choice for them without help.
Now the FCA has set out ways to tackle the gap that exists between bespoke financial advice and guidance – examples of existing guidance being information provided for free through MoneyHelper, as well as by firms.
Targeted support would allow firms to provide support to consumers in different scenarios, for example, if they identify someone is drawing down on their pension unsustainably, or where a consumer is facing uncertainty about how to take a retirement income. Firms would be able to provide a bespoke suggestion to specific groups of consumers who share the same characteristics. The FCA is suggesting that targeted support is provided for free.
The FCA further said it will follow with further proposals on introducing concepts of targeted support and simplified advice for other retail investments next year.
This is a significant moment as the reform to the regulatory framework will set the standards for years ahead. The FCA encourages feedback from all stakeholders about the proposals and views are sought by mid-February 2025.
Sarah Pritchard, executive director of consumers, Ccmpetition and international, at the FCA, said: “We want people to have access to the help, guidance and advice that they need, at a cost they can afford, when they need it, so that they can make informed decisions. So, we are reviewing the boundary between guidance and advice across investments.
“We know people find pensions particularly difficult to understand, so we are deliberately starting with this to help consumers with their pension decisions.
“If we get this right, consumers will be better supported in making financial decisions. This will potentially lead to more people investing which will help provide capital necessary to stimulate economic growth.”
Alongside this, the FCA is seeking views on whether there are any other specific areas of its regulatory framework which may need to change to enable firms to better support consumers.
Through a separate discussion paper the FCA is seeking views on whether further changes might be needed to better support consumers such as the use of digital tools, consolidation of pension pots and the rules around Self-Invested Personal Pensions (SIPPs).
In early reaction Stuart Ritchie, GSB Wealth Partner, said: “I believe these FCA proposals are a step in the right direction.
“Helping people navigate complex pension decisions with clearer guidance and targeted support will make a real difference. For far too long we’ve faced a gap between financial guidance and advice, leaving many people to make serious decisions with limited support.
“While financial planners provide an extremely valuable service, I am well aware that advice often reaches those who are relatively well off, with less than 10 percent of those approaching retirement receiving advice. By identifying common actions for people in similar circumstances, the profession can create more accessible and beneficial journeys to help individuals maximise their retirement income.”
Rachael Griffin, financial planning expert at Quilter said: “We welcome the FCA’s recent initiatives aimed at providing targeted support to millions of people with their pensions. These proposals could represent a significant step forward in ensuring that consumers are better equipped to make informed decisions about their retirement income and feel confident about their financial futures.
“Providers must be better empowered to assist those drawing down on pensions unsustainably or facing uncertainty about how to approach retirement income when not taking regulated advice. With only 9% of adults engaging with full regulated financial advice, according to the FCA, there is a clear and urgent need to expand the reach of support – whether advice, guidance or something in between the two. Targeted support, as suggested by the FCA, has the potential to act as a stepping stone towards full advice while providing information that feels more relevant to people than generic guidance.
“Many people are sleepwalking into retirement, unaware of the critical decisions they must make to secure their financial futures. In the era of defined benefit schemes and annuities, this was less of a concern, as a guaranteed income provided a reliable safety net. However, since the introduction of pension freedoms, individuals must take far greater responsibility for their retirement planning. This shift demands more engagement from savers, which is where initiatives like pension wake-up packs play an essential role. These packs aim to prompt savers to ask fundamental questions such as, “Am I saving enough?” “Do I understand the different ways to use my pension?” and “Should I seek guidance or advice to help make these decisions?”
“Our customer testing of wake-up packs reveals that most people have little understanding of their pensions before engaging with these materials. After reading the packs, they typically learn three critical points: that a personal pension doesn’t provide a guaranteed income, that guidance is available through Pension Wise, and that pension scams are a real threat. While helpful, these packs often stop short of providing actionable guidance. Targeted support, however, has the potential to go much further by offering insights tailored to specific consumer needs. By setting out how individuals with similar characteristics plan their retirement, targeted support could bridge the gap between one-size-fits-all communications and more personalised assistance.
“The FCA’s proposals for targeted support come at a time when potential changes to the inheritance tax efficiency of pensions is causing concern among savers. The mere suggestion of reforms often leads to reactive behaviours, with individuals making hasty financial decisions that may not align with their long-term goals. For instance, the prospect of pensions becoming part of the taxable estate has already spurred some customers to think about depleting their pensions more quickly so to leave less left upon death. These types of behaviours show that for targeted support to be truly effective, it must be accompanied by a clear roadmap of future tax changes. This would help savers and providers alike to plan with confidence, reducing the likelihood of knee jerk decisions and ensuring that targeted support delivers the best possible outcomes in a stable policy environment.
“As we approach a tipping point, with the first generation of entirely defined contribution pension savers nearing retirement age, the stakes are higher than ever. This cohort faces significant risks, as poor decisions could have a lasting negative impact on their financial well-being in later life. Targeted support is not a magic fix and cannot replace the need for broader financial literacy and planning, but it could serve as a crucial building block. By fostering greater engagement and offering clearer options, it can help savers make better decisions, reducing risks and improving outcomes.
“However, the FCA states that firms would need to apply the threshold of having reasonable grounds for believing that the delivery of targeted support suggestions would deliver a better outcome for their customers than if targeted support was not provided. This should avoid targeted support being used as a sales channel and funnelling customers into unsuitable solutions unless they are demonstrably beneficial.
“Nevertheless, there are important questions that must be addressed. Is the data available robust enough to allow providers to offer meaningful and accurate targeted support? Will data protection rules limit the ability to tailor communications sufficiently? A consistent approach across the industry, with clear consumer personas, will be vital to avoid fragmented, inconsistent, or muddled targeting. Without this, there is a risk of creating confusion rather than clarity.
“For targeted support to succeed, it must also be fully understood by consumers and providers alike. The roles and boundaries between guidance, targeted support, and regulated advice must be crystal clear. Direct bespoke product recommendations should remain firmly within the remit of regulated advice, maintaining the essential distinction between guidance and advice.
“For targeted support to succeed, it must also be fully understood by consumers and providers alike. The roles and boundaries between guidance, targeted support, and regulated advice must be crystal clear. Direct bespoke product recommendations should remain firmly within the remit of regulated advice, maintaining the essential distinction between guidance and advice.
“Additionally, it’s vital that customers who benefit from comprehensive financial advice from an adviser are not confused by targeted support. We must avoid situations where clients feel conflicted between the holistic advice from their adviser and the support from their provider, which may not consider their entire financial situation.
“As the FCA refines these proposals, Quilter is committed to contributing to the consultation process and supporting initiatives that promote financial confidence and well-being. By working together, regulators, providers, and consumers can ensure that these reforms lay the foundation for a more secure retirement future for millions across the UK.”
Ian MacKenzie, Chief Operations and Technology Officer at St. James’s Place says: “We are passionate advocates of personalised, face-to-face advice, and we strongly believe that increasing the availability of financial advice is key to addressing the advice gap and ensuring great outcomes in retirement. However, we also recognise the need for more to be done for consumers who do not currently receive any form of advice. The proposals around Targeted Support present an excellent opportunity—both for consumers and the industry—to bridge this gap.
“We fully support the aims the FCA and HM Treasury are seeking to achieve, namely: that consumers are able to make better-informed decisions, avoid poor outcomes, and are actively engaged with their pensions. We believe Targeted Support would be helpful in providing guidance to those who are in decumulation, but we also see opportunities to help those in accumulation.”
“There are likely to be multiple avenues for firms supporting retail investors to utilise these proposals in developing new services for those not yet ready to receive advice. There are also opportunities to assist clients who have invested but may no longer be receiving advice to help support their financial goals, including retirement planning.”
“There is a lot of detail to consider in this latest consultation. Key to the success of these proposals will be whether consumers fully understand what they have received and what they haven’t (i.e. that it isn’t advice). We look forward to continuing to work with the FCA, HM Treasury, and the rest of the sector on the designs of these important reforms and ensuring that they serve the needs of consumers and clients.”
Steven Cameron, Pensions Director at Aegon said: “The FCA’s latest consultation on Targeted Support reforms for pensions is the most exciting chapter yet in the long-running Advice Guidance Boundary Review saga.
“While there’s much detail to thrash out, Targeted Support could herald a ‘new dawn’, bringing huge benefit to the millions of auto-enrolees who regrettably won’t consider advice but who are crying out for help.
“Many auto-enrolees share what the FCA calls ‘common characteristics’ of not paying sufficient contributions to deliver an adequate retirement income. Others will never have considered investment options outside their default fund.
“The potential benefits are arguably even greater when it comes to making decisions around when and how to take a retirement income. Here, giving the consumer more confidence to make well-informed decisions with an understanding of the risks has to be a good thing.
“We’re pleased to see the FCA structuring its proposals primarily around the outcomes-based Consumer Duty, proposing further rules or guidance only where required to offer firms clarity or to ensure consumer protection.
“There’s major scope for firms to consider under which scenarios Targeted Support could offer ‘ready-made solutions’ to drive better outcomes, for identified customer segments, defined with appropriate granularity.
“It’s critical that consumers are made fully aware that Targeted Support will not deliver the value add of holistic financial advice, or offer a personal recommendation. But as well as being open to manufacturers, we strongly believe adviser firms should be given the option to design their own Targeted Support solutions alongside holistic advice should they identify a customer benefit.”
Tom McPhail, Director of public affairs at the lang cat said: “These proposals from the FCA are revolutionary in making a significant and meaningful change to how firms can communicate with customers and, as a result, could help reduce the Advice Gap which we recently identified as affecting 91% of the UK population. This is also apparent from their strong steer, although not an actual requirement, that targeted support should be free at the point of use. We have to be careful here not to create a new market that only the largest firms are able to operate in but I’m sure the FCA with their competition objective will be fully aware of this risk.
“There is also a risk with the proposals, which the FCA appears comfortable with, that in allowing firms to use language with customers such as ‘we suggest <a particular product solution>, based on this being appropriate for people in similar circumstances to you’ could result in customers believing they have received advice when they have not.
“So we welcome these proposals and the FCA’s boldness is trying to help savers achieve better financial outcomes, however the solution is by no means risk free; effective customer communication and disclosures will be essential to mitigate this risk.”
Stephen Lowe, group communications director at retirement specialist Just Group, said: “The latest data from the FCA shows that only four in 10 pensions accessed in 2023/24 were taken with the help of regulated advice or guidance so it is clear that further interventions are necessary in order to help more people get support when first deciding how to use their pensions.
“This is a once-in-a-decade opportunity and its critical everyone across the industry gets behind this theme for the benefit of savers. Closing the advice gap by a meaningful amount is realistically likely to be a multi-year project. Targeted support could be a game changer and it’s the service that has generated most optimism.
“In addition, we would also like to see further steps to make the use of the Government’s free independent and impartial guidance service, Pension Wise, ‘the norm’ so that it becomes a natural step before first accessing pension cash.”
