FCA proposes default investment options and cash warnings for non-workplace pensions

FCA are consulting (CP21/32) on measures to help consumers manage their non-workplace pensions.

More consumers are buying non-workplace pensions without advice, and these consumers have to choose their own investments from an increasingly wide range of options. The complexity can make it hard for consumers to choose investments that meet their retirement needs and they may end up with investments that are not appropriately diversified and with too much or too little risk.

As well as poorly chosen baskets of investments, some consumers hold cash in their non-workplace pensions, which over the long term are at risk of being eroded by inflation. Investing in growth assets rather than cash is likely to deliver a larger pension pot at retirement.

The FCA is proposing that non-workplace pension providers: 

Offer a 'default' investment option to new non-advised consumers 

A professionally designed investment strategy could deliver substantially better outcomes for those motivated enough to know that they need a pension, but who lack the experience or time to choose the right mix of investments.

Issue cash warnings to consumers with sustained and potentially inappropriate levels of cash in their non-workplace pension 

Cash warnings would show how cash savings are at risk of being eroded by inflation and prompt consumers to consider investing in other assets with the potential for growth (such as a default option, if available).

Responses to the consultation are requested by 18 February 2022, with final rules sometime later in the year.

"We are asking for views on our proposed rules to improve outcomes for consumers saving into non-workplace pensions."

https://www.fca.org.uk/publications/consultation-papers/cp21-32-improving-outcomes-non-workplace-pensions