PS19/21: Retirement Outcomes Review: feedback on CP19/5 and our final rules and guidance

Update – April 2020

We have revised the implementation date of these rules.

The FCA supports firms’ reprioritisation to focus on preventing and mitigating consumer harm during the coronavirus (Covid-19) pandemic. We believe that the benefit to consumers from firms dedicating resources to dealing with critical functions in the short term may outweigh the harm from delaying the implementation of certain polices.

We have issued a package of guidance for pension providers[4] which includes:

• confirmation that the FCA Board have made new rules which revise the implementation dates of the rules in this policy statement (other than those already in force) by 6 months until 1 February 2021. This extended implementation period recognises the operational challenges of implementing new rules in the current circumstances. It does not relax any other regulatory requirements. Firms must continue to treat their customers fairly and act professionally and in their client’s best interests.
• guidance to help defined contribution (DC) pension providers to have the right kind of discussions with their customers about the risks and implications of changing or accessing their pension in the current circumstances.

Read PS19/21 (PDF)[5]

Why we are changing our rules

We are introducing new requirements primarily to help non-advised drawdown consumers who struggle to make investment decisions. We also intend these requirements to promote competition by making the actual charges paid by consumers clearer, and comparisons easier.

Our new rules and guidance:

• introduce ‘investment pathways’ for consumers entering drawdown without taking advice
• ensure that consumers entering drawdown only invest mainly in cash if they take an active decision to do so
• require firms to send annual information on all the costs and charges paid over the previous year to consumers who have accessed their pension

Background

The 2015 pension freedoms give consumers more complicated choices to make about how to invest their pension savings, and when to draw on them. In 2016, we launched ROR to investigate how consumers and providers were responding to the pension freedoms.

Our ROR Final Report[6] (June 2018) set out our findings and our proposed package of remedies, which we have consulted on in 2 stages.

We published our final rules and guidance on the first stage in PS19/1[7] (January 2019).  This covered ‘wake-up’ packs, information for consumers about annuities, and changes to make the cost of drawdown products clearer and more comparable for consumers.

This Policy Statement (PS19/21) sets out our final rules and guidance on the second stage.

Who this applies to

This Policy Statement will be of interest to firms providing income drawdown. It 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 pensions and 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 of pensions and retirement income products