‘Game-changing’ additional support for pensions could help millions | Personal Finance | Finance

At least 18 million people could be offered extra help with their investments and pensions over the next decade with the ‘game-changing’ introduction of targeted support, the  Financial Conduct Authority (FCA) has said. This will enable firms to provide consumers with targeted suggestions, helping them make more informed decisions about how to manage their finances.

Customers will receive recommendations, but they will not be based on a full, in-depth individual assessment. In turn, firms will need to make sure the recommendations are suitable and should only be offered when they put people in a better position, the regulator said.

New legislation will need to be passed before targeted support goes live. The regulator said that firms which can demonstrate they are ready, willing, and organised to undertake targeted support will be authorised swiftly after the provisional go-live date in April 2026.

According to FCA data, around seven million adults in the UK with £10,000 or more in cash savings could be missing out on the benefits of investing throughout their lives. It is believed that the changes could help narrow the ‘advice gap’ and empower more people to make informed financial decisions tailored to their needs.

People can receive help making decisions based on their personal circumstances by paying for financial advice. But less than one in 10 people obtain regulated financial advice – while nearly one in five turn to family, friends or social media for help making decisions – the regulator said.

The value of investments can fluctuate, but they can often outperform savings held in cash over the longer term. On Monday, the FCA outlined changes aimed at increasing consumer access to investments and helping people take informed risks.

It proposes new rules for product information on investments, while also drawing a more distinct line between retail and professional investors, who may not need to fall within the scope of retail regulations. The steps are part of wider efforts to ‘move the dial on risk’ and encourage investors to diversify their investments beyond cash, according to the regulator.

The plans align with Government aims to build a retail investment culture in the UK. The FCA has also launched a ‘firm checker’ tool to help prevent people from losing money to fraudsters – and it has said around 800,000 people reported losing money to investments or pensions‑related scams in the 12 months to May 2024.

The tool is on the FCA’s website at www.fca.org.uk/consumers/fca-firm-checker. Sarah Pritchard, deputy chief executive of the FCA, said: “Targeted support will be game changing. It means millions of people can get extra help to make better financial decisions.

“We also hope it will build greater confidence to invest. While investing will not be right for everyone, we know people in the UK invest less compared to the EU or US. People in the UK could be missing out on the potential benefits of investing in the medium to long term.”

Yvonne Braun, director of policy, long-term savings at the Association of British Insurers, said: “Targeted support has the potential to make a real difference to people’s financial lives. At a time when only 9% of people take regulated advice, targeted support will give people help they can rely on when making complex financial decisions. The FCA’s new rules mark a significant step towards closing the advice gap and will empower millions.”

Meanwhile, Keith Phillips, chief executive of investment platforms trade body The Platforms Association, added: “The industry has long called for the freedom to present information in ways that genuinely help customers understand their investment choices.

“We welcome the FCA’s targeted support initiative, which will allow platforms to deliver the right information, at the right time, to support customers to make the right investment decision. The previous system was far too prescriptive, with disclosure templates that people really struggled to engage with.

“Improving financial education is essential to giving new investors the confidence to take that first step toward making their money work for them.”

Alistair Brannan, EY UK life, pensions and personal lines leader, said: “While the investment journey is clearly a critical one, clarity on targeted support and wider reforms to pension rules will also help firms determine how they can better support the many customers at the point of retirement – a time when decisions taken can have significant and lasting implications.

“Recent EY research shows nearly a third of those at or nearing retirement age have never sought financial advice, despite being open to financial recommendations. This is a large proportion of people who are not accessing guidance that could be invaluable to them.”

Mr Brannan also added that the rules ‘are designed to respond to longstanding calls from industry for greater flexibility to better support their customers’. He continued: “The onus is now on providers across the banking, wealth and retirement sectors to consider how to respond.

“For example, with consumers demonstrating growing comfort levels in sharing personal information with firms, there is a clear opportunity to leverage data and advanced analytics to group customers with similar characteristics, so firms can offer them the relevant, targeted support the FCA recommends.”

Economic secretary to the Treasury Lucy Rigby said: “Targeted support will allow millions of people across the country to supercharge their savings and invest with confidence. This extra support for savers has the potential to be transformative for retail investment in Britain.”