The regulator says consumers will be sent “wake up packs” earlier – at the age of 50 rather than just a few months before they retire – telling them about their pension options as they approach retirement.
It’s also consulting on giving some consumers ready-made investment plans for their pensions, and making pension charges more transparent and predictions easier to compare.
Since 2015, pension freedom means that anyone over 55 can choose to take their entire private pension as a lump sum – before that, pensioners could only take a quarter of the money as a lump sum, with most having the rest paid as an annuity.
While this gives people more flexibility when accessing their pensions, it also means they can be left making complicated choices, and some could be left open to costly mistakes. The FCA says it’s “expressed concern” that some are withdrawing their private pensions but not properly investing them, meaning they’re not getting enough out of their money to meet their needs.
It estimates that 100,000 consumers each year take a drawdown pension, which is an investment that pays you income, without getting any advice. It says the new measures will help stop those people losing out on pension income worth an estimated £25 million a year, and force providers to be more competitive.
For more help understanding your private pension, see our Guide to taking your pension.