Financial Conduct Authority's (FCA) Advice/Guidance Boundary Review Proposals on Pensions - Which? response

Which? welcomes the further research and policy development that the FCA has undertaken to explore whether a new framework of Targeted Support could improve outcomes for consumers, following concerns that Which? and other stakeholders outlined in response to its previous joint consultation with HM Treasury with many crucial parts of the proposals yet to be narrowed down and no decision yet made about what – working with HMT – changes need to be made to the legislative framework to introduce this new regime, we cannot fully assess the proposals in their current form as we are unable to understand the overall impact this will have, including on consumer protection. 

Based on the FCA’s current approach, we cannot support Targeted Support in pensions due to major concerns with key areas. We have three key concerns: 

• A lack of consumer protection that is proportionate and specific to the risk of harm with people’s pension savings. The current proposals involve less specific requirements than for some areas of non-advised communications despite aiming to allow firms to go much further in personalising support for consumers. Allowing firms to make suggestions to customers based on ‘limited information’ as long as they can reasonably expect a ‘better outcome’ is too subjective and does not sufficiently guard against firms making suggestions not suited to the individual’s personal circumstances. 
• The proposals undermine the existing advice boundary, by proposing that Targeted Support could make suggestions for specific products which under existing rules would require regulated financial advice. This would mark a major reduction in consumer protection. 
• There is little detail on how the FCA would approach enforcement, aside from a question on whether consumers should be able to make a complaint to the Financial Ombudsman Service which we see as essential but not sufficient on its own.

To address our concerns, we make three recommendations: 

• Recommendation 1: Targeted Support should only be introduced to prevent foreseeable harm for customers using existing products and services, and should therefore not allow firms to suggest new products or services. 
• Recommendation 2: A significant programme of testing led by the FCA is required to determine whether firms can appropriately design and implement Targeted Support in pensions, and to test how best to design the choice architecture and consumer journeys to support good customer outcomes, including how to encourage take-up of the free and impartial guidance offered by Money helper. 
• Recommendation 3: This FCA-led testing programme should inform a bespoke consumer protection regime that is proportionate and specific to the risk of harm with people’s pension savings.  

More broadly, we have welcomed FCA attempts to further clarify how firms can support consumers without needing to provide regulated financial advice. The FCA should investigate what firms have done to put this new guidance into practice, to help further understand how the FCA can work with firms to address any misguided concerns resulting in firms taking an overly risk averse approach to supporting good customer outcomes under the Consumer Duty.