Nearly a third of pension drawdown sales are non-advised. This figure rises sharply if you also include first-time access as a full cash withdrawal, annuity purchase and simplified withdrawal under the UFPLS rules. Perhaps it is time for this significant swathe of self-directed investors to receive a little TLC from the investment world.
Many direct platforms have been enhancing their retirement services in recent years. DIY decumulation has come a long way in some ways but it still has plenty of room for improvement.
Guidance is widely available from platforms on drawdown options, calculating retirement income needs and how to invest for drawdown, but coverage is patchy and of varying quality and they could do a lot more in this space. Cue the regulator and its proposals for offering DIY investors ‘Investment Pathways’.
The FCA is about to follow up on its January consultation document Retirement Outcomes Review. This set out to explore how DIY investors are accessing their pensions and taking an income in retirement.
The regulator’s main concerns are about poor consumer outcomes – in short, the FCA thinks that DIY investors don’t really understand how to plan their retirement income. Many investors entering drawdown “struggle to make investment decisions, or are not engaged enough to do so”.
The investment pathways proposals would require all providers of non-advised drawdown to offer a choice of solutions to investors when they move their pension into drawdown or when they transfer funds already in drawdown into a new arrangement.
At Platforum, we think that such pathways have their place – even if their effect is just to cut the shockingly large number of investors who take their first drawdown payment as a full cash withdrawal. But we are also believe that most DIY investors won’t want to follow these prescribed tramline – they will want to remain true to their own DIY approach.
The final policy statement is due to be published in July 2019, and we wait with bated breath to see how far the FCA will to go to change the DIY decumulation market.
We have looked at the DIY decumulation market, along with the more dynamic advised drawdown market in our latest Decumulation Strategies report. Get in touch for more details.