The Financial Conduct Authority (FCA) has released new detail on its forthcoming targeted support framework, estimating that at least 18 million people could receive additional help with their pensions and investments over the next decade.
The new model will allow firms to provide more tailored prompts and specific suggestions to consumers, with the aim of improving understanding and supporting more informed financial decision-making.
The FCA views the initiative as a way to bridge the long-identified gap between full financial advice and minimal guidance, particularly for people making complex long-term choices without professional support.
David Brooks, head of policy at Broadstone, said: “Targeted support has the potential to close one of the most persistent gaps in the UK pensions and investment system which currently sees millions of people making long-term financial decisions with little to no guidance or financial advice. Empowering firms to give consumers clearer, more tailored nudges is a sensible and pragmatic step that should deliver better outcomes for more savers and investors.
“The targeted support announcement follows hot on the heels of a landmark package of proposals issued by the FCA earlier this week to encourage greater investment and clearly defines the regulator’s direction of travel. There is now a clear and concerted mission to extol the benefits of investment and its ability to deliver long-term financial security.
“Key to the success of this initiative will be execution. Firms will need absolute clarity on the advice/guidance boundary to support complex decision making and to ensure that targeted support does not create new risks or uncertainty. Trustees of occupational schemes would be wise to keep abreast of targeted support developments as it is likely that it will apply to the communications and support that they deliver to members.”
Ben Hampton, CEO of advice at Royal London, added: “With the FCA’s final rules on Targeted Support published, the financial services industry is on the brink of a transformative shift. Its introduction promises to reshape how millions access financial help, particularly at critical life stages such as retirement.
“Our own modelling shows that as many as 21.5 million people across the UK could benefit from Targeted Support, underlining the scale of the opportunity to help people make better decisions and build their financial resilience.”
Paula Llewellyn, CEO, DC & Workplace Savings at L&G, said: “We strongly welcome the FCA’s introduction of targeted support, a pivotal step in helping people make more confident long-term financial decisions. For years, we’ve championed reforms that allow providers to move beyond generic guidance and today’s announcement gives the clarity the industry needs to progress this new era of support.
“Our own experience shows the power of innovative member engagement. Members using our Guided Retirement Planner are now 50% less likely to face a projected shortfall after adjusting their plans. This clear evidence of the benefits of tailored guidance underpins why targeted support will be so impactful as firms will now be able to take this to the next step and offer ready-made suggestions.”
Llewellyn continued: “We were among the first firms to engage with the FCA’s pre-application process for targeted support because we see enormous potential for this reform to close the advice gap and transform the financial behaviours of the UK, such as building a more robust investment culture.
“Just yesterday, L&G joined 19 other firms to launch the UK Retail Investment Campaign, a landmark initiative to build a more confident national investment mindset; targeted support is exactly the type of tool needed to help achieve that ambition.
“Targeted support will play a vital role in improving retirement outcomes by inspiring better informed, long term financial decisions.”
