Launching a consultation into proposed measures to protect pension holders, improve engagement and promote competition, the FCA said: ‘While consumers have welcomed the freedoms, some are at risk of harm. For example, the FCA estimates that some drawdown customers could receive 37% more retirement income from their pot every year by investing in a mix of assets rather than cash’.

The consultation was announced at the same time as the publication of the final report of the Retirement Outcomes Review, set up by the FCA to look at how the pensions and retirement income sector has functioned since pension freedoms were introduced in 2015.

‘The [proposed] measures will help consumers at key points when they make decisions about what to do with their pension pot, as well as providing ongoing support to consumers once they have accessed their pension savings. They include improvements to the clarity and timings of communications prior to people making decisions about what to do with their pension pot, simplifying the options that people have, and the ongoing communications people receive,’ said the FCA in a statement.

Christopher Woolard, executive director of strategy and competition at the FCA added that more support was needed to help people make complex decisions on how and when to access their pension pots.

‘We know that the choices introduced by the pension freedoms have been popular with many consumers,’ he said. ‘However, they are now required to make more complicated decisions than ever before. Many people need more support when making choices. The measures we have outlined today will help them think about that earlier, create investment pathways to help them with their choices and make costs and charges easier to understand.

‘This is an important market that is still relatively new and is continuing to evolve. This is not the end of the work we are doing and we will continue to keep the market under review as it develops.’

The FCA’s main proposals are:

•  ‘Wake-up’ packs should be sent to customers from the age of 50 and then every five years until the customer has fully accessed their pension.
• Consumers should be offered advice when they access their pension pots
• All consumers who have accessed their pension should receive information from their provider annually, whether or not they are currently drawing an income from their pot.

Commenting on the review and proposals, director general of the Association of British Insurers, Huw Evans said consumers needed to be able to easily compare products.

‘We have already laid the foundations for how a drawdown comparison tool could work in practice because we recognise how important it is for customers to be able to shop around. We agree a simpler presentation of charges will need to be a part of that.’ he said.

Report by Rob Munro