"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."
- Sarah Pritchard, executive director of consumers, competition and international at the FCA
The FCA has set out proposals to help UK savers to make better decisions about their pensions as part of its wider review into how the boundary between advice and guidance on investments operates.
The regulator says it 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.
The FCA's research also shows that 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.
It has now set out plans to tackle the gap that exists between bespoke financial advice and guidance.
The FCA says 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 also 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 regulator will follow with further proposals on introducing concepts of targeted support and simplified advice for other retail investments next year.
The FCA described the proposals as "a significant moment as the reform to the regulatory framework will set the standards for years ahead". It is encouraging feedback from all stakeholders about the proposals by mid-February 2025.
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.
Sarah Pritchard, executive director of consumers, competition 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.”
Industry reacts
The pensions industry responded positively to the FCA's announcement, agreeing that targeted support could help address the gap for people who don’t need full advice yet, but stressed that it will not deliver the value of holistic financial advice.
Ian MacKenzie, chief operations and technology officer at St. James’s Place, said: “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.
Jamie Jenkins, Director of Policy at Royal London, agreed: “The targeted support proposals could help address the gap for people who don’t need financial advice just yet, but who could do with some help on how to engage with their retirement savings. And, for many, that engagement could mean advice will be a natural next step in the future.
“This is quite a radical departure from previous attempts to reduce the advice gap, and we should seek to make it a success as future generations start to accumulate significant pension savings as a result of automatic enrolment. However, anyone looking at this as an opportunity to simply sell products has completely missed the point.”
Steven Cameron, pensions director at Aegon, commented: “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.
“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.
“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.”
Mike Ambery, retirement savings director at Standard Life, said: “We welcome the FCA’s update on the next steps on consultation for pensions targeted support as a significant step forward in bridging the gap between advice and basic guidance. Nearly ten years on from pensions freedoms, many consumers saving into defined contribution pensions lack the confidence to make informed decisions about their retirement savings. By enabling firms to work with customers to determine whether there are common actions that people in similar circumstances typically take, these proposals should empower the industry to provide customers with beneficial journeys that can help them maximise their retirement income.
“Recent Standard Life research found that among those who receive professional advice, 59% feel positive about their financial situation compared to just 35% of non-advised individuals. Additionally, 61% of planners expressed confidence in understanding their pension options, compared to only 21% of non-planners, highlighting the potential power of accessible advice and personalised guidance to boost people’s long-term financial wellbeing. Targeted support is a good first step towards this greater accessibility, particularly as the FCA has suggested it should be provided for free – we know cost can be a barrier to seeking advice. "
Rachael Griffin, financial planning expert at Quilter, added: "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.
"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.
"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.
"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."
