Matthew Brown, private client partner, Thomas Miller Investment, comments on the FCA’s asset management report:
“The FCA’s interim report of the retirement market makes interesting reading. This is not because of the findings that the freedoms are popular or that those with very small funds decide it is not cost effective to take advice; these facts are mere confirmation of what one would reasonably expect. What is interesting is the proposal to decouple drawing tax free lump sums and taking income.
“Moving to a position where people can tax a tax free lump sum without moving into drawdown contract is an excellent idea and one that should be embraced by the pension profession. Although this will lead to greater levels of administration by schemes, and therefore costs, it would make it far easier for those for whom advice is not cost effective to access pension freedoms. Clearly, anything that makes it easier to access a pension without advice will have potential downsides but at some stage we must trust people with their own money.
“Of equal note, is the commentary on the lack of market innovation developing alternatives to drawdown. The FCA would like to see products that provide a half-way house between guarantees and flexibility. The reality is people want simplicity, that is one reason why the freedoms are popular. Innovation will lead to complexity and will be shunned by the market. Pushing for the simplicity of not needing to transfer a pension to access tax free cash but wanting a complex income offering is arguably a mixed message from the regulator.
“The future of pensions, and indeed of financial planning, are simple transparent products tailored to individual circumstances. At the lower value end of the market, the regulator is doing the right thing by taking the lead to ensure transactions are straightforward and cost effective. Those with more complex situations need professional advice but the key to a robust plan is often flexibility and simplicity; today’s report is proof of that.”