The terms of reference state the review will also look at non-advised customer journeys and notes that “there are also now higher numbers of consumers entering income drawdown products without use of a regulated adviser. [Figure 4 shows that] for the period October to December 2015, 32% of reported drawdown sales were not associated with a regulated adviser. In the Retirement Income Market Study, we noted that in 2013, 97% of new income drawdown sales were sold through advice services.”
Jon Greer, pensions technical expert at wealth manager Old Mutual Wealth, comments:
“Non-advised drawdown is a relatively new phenomenon. Before the pension freedoms were introduced in April 2015 there was effectively no such thing, and a customer also needed to have a secure retirement income from other sources before they could even consider the type of drawdown flexibility on offer today. As the rules have changed it is entirely right that the FCA is looking at how customers come to their decision to take their retirement income in this way.
“Drawdown can be a very tax-efficient method of securing a retirement income, provided customers choose the most appropriate strategy for their needs and circumstances.
“The new normal for retirement income is about choice and it is vitally important that customers understand their choices before they make them. We firmly believe that receiving full professional financial advice is the best way to achieve this. Our research with YouGov shows that 60% of those aged 50-75 who have never seen an adviser suggest they have little or no understanding of drawdown. This falls to 38% if the respondent saw a financial adviser to plan their retirement.
“40% of those who have never seen an adviser state they have no understanding of drawdown at all. This figure is more than halved (18%) if they saw an adviser.”