Pension providers will be able to offer direct recommendations to savers for the first time under a major new regime set out by the Financial Conduct Authority (FCA), in a move experts have lauded as a “game-changer” for inexperienced savers.
The regulator said its targeted support framework is scheduled to launch in April 2026.
Firms will be able to apply from March. The dates remain dependent on parliament passing the required legislation.
The scheme is intended to allow providers to suggest specific actions or products to groups of customers in defined circumstances.
The FCA said the framework is designed to give people additional help with complex financial decisions.
Any recommendations must comply with Consumer Duty requirements. The regulator said firms should only make suggestions if the guidance is likely to leave customers better off.
The FCA estimates that at least 18million people could receive additional help with pensions and investments over the next decade.
Research by the regulator flags a severe need for accessible guidance.
Pension providers will be able to give savers direct recommendations for the first time under a new FCA regime, a move experts call a “game‑changer” for inexperienced savers
|
GETTYThe FCA found that three-quarters of defined contribution pension members aged 45 and over do not have a clear plan for accessing their retirement savings.
It also found that just 22 per cent of those surveyed said they understood their options when taking their pension.
The FCA said around seven million adults holding £10,000 or more in cash savings could be missing out on the benefits of investing.
Sarah Pritchard, the FCA’s deputy chief executive, said targeted support marks a substantial shift in how consumers will receive help.
“Targeted support will be game-changing, it means millions of people can get extra help to make better financial decisions.”
Experts say the targeted support marks a substantial shift in how consumers will receive help
|
GETTY
Ms Pritchard said the regulator wants to boost confidence in investing, with people in the UK invest less frequently than those in the EU or US.
Industry bodies have broadly welcomed the introduction of the regime.
Yvonne Braun, director of policy for long-term savings at the Association of British Insurers, said: “The FCA’s new rules mark a significant step towards closing the advice gap and will empower millions.”
Current data shows only nine per cent of people take regulated financial advice.
Alongside the targeted support framework, the FCA has proposed expanding the use of interactive digital pension planning tools.
The proposals would allow firms greater flexibility in how they present projections within digital tools.
The regulator said tools should be tailored to what customers need and understand.
The FCA said these tools would help savers explore key decisions, including increasing contributions or delaying retirement, and understand how these choices affect long-term income.
Damon Hopkins, head of DC workplace savings at Broadstone, said digital tools will help savers plan more effectively.
He said: “It is important that pension savers are able to forecast their retirement savings journey so that they can make long-term plans for the future and get a clear picture of what their retirement living standards are likely to be.”
Mr Hopkins said the new tools could show how decisions such as increasing contributions or working longer affect retirement income.
Digital tools are a growing aspect of how people understand their choices
|
GETTY
He said digital tools are becoming a growing part of how people understand their financial choices.
Experts said clarity will be critical as the new regime develops.
David Brooks, head of policy at Broadstone, said firms will need “absolute clarity on the advice/guidance boundary” to avoid uncertainty.
He said trustees of occupational schemes should monitor developments closely.
Mr Brooks said targeted support rules are likely to affect how trustees communicate with scheme members.
Research from Standard Life shows consumers are broadly positive about the targeted support concept.
The research found people welcome guidance that narrows their options to those most relevant to their circumstances.