CP19/5: Retirement Outcomes Review: Investment pathways and other proposed changes to our rules and guidance

Open consultation: CP19/5
28/01/2019
28/01/2019
Consultation closes
05/04/2019
Policy Statement
July 2019

This consultation sets out our second proposed package of remedies from the Retirement Outcomes Review (ROR). We are consulting on investment pathways and other proposed changes to our rules and guidance.

Read the summary of CP19/5 (PDF)

Read the full consultation (PDF)

Read the research report on investment pathways (PDF)

Background

In June 2016 we launched the ROR. We 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 to put the market on a good footing for the future.

The ROR focused on consumers who choose to draw down their pension savings without taking regulated advice (‘non-advised consumers’). It found that many of these consumers were losing out on retirement income because their pension pots in drawdown were invested in cash, even though they did not intend to spend their money in the short term.

In June 2018, we issued the ROR Final Report and published a Consultation Paper (CP18/17 - Retirement Outcomes Review: Proposed changes to our rules and guidance​​​​​​) setting out our proposed remedies in response to our review’s findings. In this Consultation Paper, and further to the positive responses to our earlier Papers, we are now consulting on the proposals we raised for discussion: investment pathways, ensuring investment in cash is an active decision and actual charges information.

Our remedies are explained in brief below.

Investment Pathways

We are seeking feedback from stakeholders on proposals to require drawdown providers to offer non-advised consumers a range of investment solutions - with carefully designed choice options - to help consumers choose investments that broadly meet their objectives. We describe these as ‘investment pathways’.

Ensuring investment in cash is an active choice

We are seeking feedback from stakeholders on proposals to require drawdown providers to ensure that consumers invest in cash only if they make an active decision to do so. We propose 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.

Actual charges information

We are seeking feedback from stakeholders 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.

Who this applies to

This consultation will mainly be of interest to firms providing income drawdown.

This consultation will also be relevant to stakeholders with an interest in pensions and retirement issues, including:

  • individuals and firms providing advice and information in this area
  • distributors of financial products, in particular, retirement income products
  • asset management firms
  • trade bodies representing financial services firms
  • consumer representative groups
  • charities and other organisations with a particular interest in the ageing population and financial services

Consumers will also be affected by this consultation. We welcome views from consumers on all of our proposals.

What you need to do

We want to hear your feedback on our proposals. Please send us your comments by Friday 5 April 2019.

Online response form

You can also:

  • email your responses to [email protected]
  • write to Adam Summerfield and Richard Wilson, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN

Next steps

We will consider your feedback and publish our final rules in July 2019.