FCA thematic review of retirement income advice: an overview

The Financial Conduct Authority (FCA) has conducted a thematic review to assess the quality of retirement income advice provided to consumers, which it published in March 2024.

This review aims to explore how financial adviser firms are delivering retirement income advice and evaluate the outcomes for consumers.

The key findings from the thematic review were as follows:

Pension Freedom reforms

The introduction of the UK Government’s pension freedom reforms has significantly changed how consumers access their retirement savings. With a wider range of retirement options available, it is crucial that consumers receive sound advice when accessing their pension savings for the first time and, where relevant, on an ongoing basis.

Complexity of retirement income advice

Since 2015, there has been a shift towards consumers drawing income from pension funds that remain invested. Providing suitable advice in this area can be complex. Therefore, it is essential for advisory firms to understand consumer needs and consistently deliver appropriate solutions.

Consumer Outcomes

The thematic review assessed the quality of outcomes consumers are receiving. It identified both good and bad practices among advice firms. Some firms considered their customers’ needs and designed advice models likely to lead to positive outcomes, while others fell short.

To comply with the FCA Thematic Review of Retirement Income Advice, financial advisers should take the following steps:

Review processes

• Assess their existing retirement income advice processes.
• Identify any gaps or areas for improvement.
• Update their procedures to align with the review’s findings.

• Pay attention to risk profiling for income drawdown.
• Ensure that risk assessments are thorough and accurate.

• Prioritize consumer needs and outcomes.
• Deliver advice that is suitable, transparent, and in the best interest of clients.
• Stay informed about changing consumer needs due to factors like rising living costs.

• Understand and adhere to the principles outlined in the Consumer Duty.
• Embed these principles into their advisory practices.

In summary, the FCA’s thematic review emphasizes the need for robust retirement income advice. Financial advisers must prioritize consumer needs, adhere to the Consumer Duty principles, and consistently deliver suitable outcomes.