The Financial Conduct Authority (FCA) is concerned about how pension freedoms are impacting consumers and quite rightly so, especially with regards to those accessing their retirement savings and not taking advice, putting them at risk of running out of money, or worse, being scammed.
Everyone in the pensions sector wants the best for consumers. The FCA’s consultations and policy statements on the Retirement Outcomes Review seeks to address potential areas of harm. One area of this review that is really troubling me is the implementation of investment pathways. The FCA is using a broad-brush approach and assuming that SIPPs should be treated in the same way as other pensions, not appreciating that SIPP clients are actually very different. This is despite specific acknowledgement that SIPP investors are more engaged with their pension.

Whilst I accept that many defined benefit and defined contribution pension schemes members may need help and guidance, especially those without an adviser, a bespoke SIPP client that has self invested for many years, is unlikely to need generic investment pathways that ‘broadly meet their objectives’ to guide them into retirement.



The FCA is proposing that pension providers will need to offer investment solutions, known as investment pathways, to those members or clients going into drawdown without taking advice each year. There are 4 proposed pathways with set objectives for consumers. As part of the governance structure, to enable a firm to offer these investment pathways, they will have to appoint an independent Governance Committee (IGC) to review and approve the proposed investment solutions and will need to be in place ahead of offering the pathway solutions. The cost of establishing an IGC is upwards of £300,000, a significant amount of money for any size of firm and ongoing cost estimates are similar.

However, smaller firms with less than 500 non-advised drawdown policies each year have been granted a concession. At face value this appears to be welcome news, but the detail has still to be fully understood. To make use of the concession, pension providers have two routes. Firstly, they might wish to refer investors to another pension provider that does offer investment pathway solutions but that will require due diligence to ensure appropriateness but ultimately might see a loss of business for the existing pension provider. The alternative is a referral to the Single Financial Guidance Body’s (SFGB) drawdown comparator tool. The look and feel of this is still to be seen and there is no detail yet as to how SFGB will access information to enable the tool to operate.

I believe that SIPP operators providing true self investment options should be considered separately from the FCA’s broad view of pension providers and should not be forced to offer investment pathways that could risk consumers becoming further disengaged from their pensions.

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Elaine Turtle, Director, DP Pensions