The Financial Conduct Authority is to review the level of advice consumers are receiving from IFAs on meeting their income needs in retirement.
In a statement today (January 19), the regulator said it will start contacting firms shortly as part of the review, in which it will also engage with trade bodies.
The review will also look at how firms are responding to changing consumer needs as a result of the rising cost of living, and will use the findings to inform future strategy, as well as to work out how firms are implementing the consumer duty.
The FCA said since the introduction of the government’s pension freedom reforms in 2015, the way consumers access their retirement savings has changed.
There has been a significant shift to consumers drawing an income from pension funds which remain invested, and advice in this area can be complex.
"It is important firms understand the needs of their consumers and ensure their advisory solutions deliver consistently suitable advice," the FCA said.
It added that, given the wider range of retirement options available, it is "vital" consumers get good advice at the point they first access their pension savings and on an ongoing basis if relevant.
The regulator had previously planned work on this topic (the assessing suitability review 2), but had paused this during the pandemic due to resource constraints.
The FCA said it will publish a report setting out its findings at the end of this year.
The review comes after the city watchdog said it is focusing on retirement income strategies following its work on defined benefit pension transfers in recent years.
At an event last October, the FCA’s department head for advisers, wealth and pensions, Nick McGruer said his team was currently in the evidence gathering stage.
"We've got concerns about drawdown on the basis that this is an area that is still relatively new, post-2015," he said at the time.
“It’s still something that we’re getting more evidence about. And it’s an area where people have to make difficult decisions and they’re often individuals who don’t have wealth. Or this is the first time they are confronted with a difficult decision about a large amount of money."
sally.hickey@ft.com
