APFA said the Financial Conduct Authority should particularly focus on the upcoming “guidance guarantee”, chancellor George Osborne’s pledge to provide financial guidance to every retiring member of a defined contribution pension scheme, to ensure consumers are in the “best position” to make “informed retirement decisions”.
The association’s comments came in response to the Financial Conduct Authority’s revised terms of reference for its retirement income market study.
Clear benefits of advice
Director general at APFA, Chris Hannant, said he agreed with the FCA’s review of the retirement income market but felt it should anticipate the pension changes mentioned in this year’s Budget, as they will take some time to “fully materialise”.
“The introduction of the guidance guarantee does not alter the underlying market structure of how a retiree can access their fund,” he said. “A close examination of the communication from incumbent pension providers, how consumers react to it and understanding the reasons why they do so, is vital to better understand what drives behaviour in the market.”
He added that APFA believes the guidance guarantee should make the benefits of receiving advice “very clear”.
“Speaking to a regulated adviser is beneficial and cost-effective in the long run as they can explain the different annuity options and also advise on other options such as drawdown and phased retirement.”
APFA said the FCA’s review should focus on the following:
- Monitoring developments after the guidance guarantee is introduced.
- Understanding what drives current consumer behaviour.
- Examining whether consumers have a “clear understanding” of their options and where to go next once the guidance guarantee has been implemented.
