FCA publishes consultation on simplified advice regime

The Financial Conduct Authority published a consultation paper as part of its Consumer Investments Strategy that seeks to provide a regime for simplified advice on investments into Stocks and Shares ISAs¹. The regulator set out the move in its response to the Work and Pensions Committee, which was received on 30 November 2022 and appended to the Committee's fourth special report of Session 2022-23, published on 23 January 2023¹.

The Committee's inquiry, Protecting pension savers, five years on from the pension freedoms: Saving for later life, was published as its third report of Session 2022-23 (HC 126) on 27 July 2022¹. It examined whether households in the UK have enough pension savings for retirement, what advice and guidance people need when saving for retirement, support for the self-employed and gig economy workers, and measures to close the gender pensions gap¹. The Government's response was received on 11 January 2023, and the Money and Pensions Service responded on 4 November 2022¹.

The consultation sits alongside other regulatory and guidance work described in the responses. Stronger Nudge rules and regulations came into force on 1 June 2022 to encourage individuals to access guidance when accessing their defined contribution pension savings¹. The Government said it monitors take-up through the volume of appointments attended each quarter from MoneyHelper, and that in July to September 2022 there was a 20% year-on-year increase in the number of Pension Wise appointments attended, which it said will include some impact of the Stronger Nudge¹.

On automatic enrolment, the Government said the participation rate of eligible employees in the private sector rose from 42% in 2012 to 86% in 2021, and that it remains committed to implementing the 2017 Automatic Enrolment Review measures in the mid-2020s, with legislation to be brought forward when parliamentary time allows¹. It said current statutory contributions of 8% on a band of earnings are unlikely to give all individuals the retirement to which they aspire¹. The Government also said it does not support the trial of a system by which members are automatically booked a Pension Wise appointment¹.

Separately, the report records that legislation to implement single and connected employer collective defined contribution schemes came into effect on 1 August 2022, that the Government has announced plans to apply the Triple Lock in 2023/24 with State Pensions to increase by 10.1% subject to parliamentary approval, and that on 1 April 2023 the National Living Wage for workers aged 23 and over will rise by 9.7% to £10.42¹.

Why it matters for households

The consultation concerns how advice on investing into Stocks and Shares ISAs might be delivered under a simplified regime, a question that affects people deciding where to hold investments outside a pension¹. The report does not set out the consultation's closing date, the proposed scope of simplified advice, or any cost to consumers, and none of these has been reported in the material published alongside the Committee's report¹. The wider inquiry covers retirement income adequacy, and the Government said it will provide an update of its analysis against Target Replacement Rates as soon as data is available¹. It also said it is developing a definition of the gender pensions gap and building an evidence base¹. For households, the practical changes described with fixed dates are the Stronger Nudge rules in force since 1 June 2022, the 10.1% State Pension increase planned for 2023/24 subject to parliamentary approval, and the National Living Wage rise to £10.42 from 1 April 2023¹.

What happens next

The Government said it aims to bring forward legislation on the 2017 Automatic Enrolment Review at a suitable opportunity and when parliamentary time allows, and remains committed to a consultation on implementation¹. It said it will work with the Money and Pensions Service to consider feedback on users' experience of Pension Wise and the impact of the Stronger Nudge¹. The Committee had recommended that metrics for evaluating the stronger nudge be published by March 2023 and that the evaluation be completed no later than the end of July 2023¹. The Government did not support automatic booking of Pension Wise appointments but said it will consider all options for signposting and nudging individuals to appropriate guidance¹.