Not all providers are required to provide these investment pathways: schemes that are deemed small schemes or unable to provide pathways themselves will have other options.
Small self-administered schemes, or others that have less than 500 clients entering non-advised drawdown, are able to refer their non-advised clients to either another provider’s pathway solution, or the single financial guidance body’s drawdown comparator tool (when operational). I can’t see either of these being a popular option, because they may result in business moving to another provider and will look a little strange to the client in the first place. As this is a consultation proposal I suspect there will be push back on this option.
Those that don’t want to or can’t offer pathway solutions, but don’t fall into the small-scheme category, will have to provide pathway solutions for at least two of the four client objectives described in Table 1. They will have to refer consumers to another provider’s pathway solutions for any objectives where they don’t provide one themselves.
Table 1: How the pathways will be determined
Option | Pathway |
One | I have no plans to touch my money in the next five years |
Two | I plan to use my money to set up a guaranteed income (annuity) within the next five years |
Three | I plan to start taking my money as a long-term income within the next five years |
Four | I plan to take out all my money within the next five years |
Source: SJP. Copyright: Money Management
Providers will only be able to offer a single pathway for each of these four objectives. Should a client not choose an objective, or fail to take up a pathway solution, the FCA says a provider should then either prompt the consumer to take advice or guidance, direct them to review the investment pathways again, or give them more information to help them make their investment decision.
The investment pathway consultation ends on April 6 2019, so there is sufficient time for those interested to have their say. I was surprised to see such a detailed consultation given the toing and froing on the need for these investment pathways.
But it is a good thing they are only required for non-advised clients, because those giving clients good investment advice doubtless wouldn’t be happy about having their toes stood on – by either the FCA or by providers forced to offer investment solutions to all clients.
Claire Trott is head of pensions strategy at St James’s Place Group
