Commenting on the latest FCA consultation paper on Targeted Support, issued today, Steven Cameron, Pensions Director at Aegon, said: “For many years, bridging the gap between those who benefit from advice and those who don’t has looked insurmountable. Time will tell if Targeted Support delivers a ‘giant leap’, but it certainly has the potential to be far more than ‘one small step’ for the non-advised.
“Targeted Support will never offer the personalised recommendations of holistic advice, and every effort should be made to grow the advised population including further consideration around simplified advice. But alongside this, Targeted Support has a pivotal role to play in offering a more personalised form of guidance for those who can’t or won’t seek financial advice. For many, it could be a valuable stepping stone towards seeking full holistic advice at a later life-stage.
“Targeted Support has the potential to help non-advised customers - including millions of auto-enrolees - with assessing adequacy of contributions and navigating their retirement options. The FCA and Government are also hoping Targeted Support will encourage those with arguably ‘too much’ in cash to invest some of the excess, not least to boost UK economic growth.
“While we expect the Government’s Pension Adequacy Review to commence shortly, it’s unlikely we’ll see increases in auto-enrolment minimum contribution rates any time soon. In the meantime, Targeted Support could play a key role in helping people understand what ‘adequacy’ means for people like them, potentially leading to voluntary increases in pension contributions.
“The Pension Schemes Bill is placing a new requirement on schemes to design ‘default pension benefit solutions’ for members who don’t engage with their own retirement income choices. This will be challenging, with different default solutions likely needed for different groups of members. Targeted Support could help here, offering insights into how to develop tailored suggestions for groups of customers with common characteristics.
“This latest consultation provides an opportunity to address outstanding issues to make sure Targeted Support doesn’t fall at the last hurdle. Some aspects such as the rules on defining customer segments or monitoring improved outcomes for customer groups, are within the FCA’s full control. While consumers must have adequate protection, unnecessarily onerous regulations could limit supply and there’s detail to study here.
“We’re also pleased the FCA is looking to address barriers which sit outside its remit. It’s essential that the Financial Ombudsman Service (FOS) doesn’t assess Targeted Support against the same standards as full advice. Furthermore, if the Privacy and Electronic Communications Regulations (PECR) class Targeted Support as direct marketing without any special provisions, the reach of Targeted Support, particularly for auto-enrolees, will be much restricted.
“We look forward to responding to this latest consultation and welcome the FCA’s ambition to open the authorisation gateway for firms from next March.”
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