UK. Why investment pathways matter more than you think
The FCA launched its Retirement Outcomes Review in 2016 to check how the market was developing after the introduction of pension freedoms and address any signs of consumer harm.
It found many who chose to draw down pension savings without taking regulated advice were losing out on retirement income because their pension pots were invested in cash, even though they didn’t intend to spend it in the short term.
Two consultations were issued as a result of the review. First, CP18/17, which proposed a remedy package including better communications, support and guidance, and wake-up packs – improved advice at the point drawdown is entered or an annuity is purchased.
This consultation also introduced the concept of investment pathways. Or, in other words, ready-made investment solutions a provider believes meets one of the following four standardised objectives:
I have no plans to touch my money in the next five years
I plan to use my money to set up a guaranteed income (annuity) within the next five years
I plan to start taking my money as long-term income in the next five years
I plan to take out all of my money within the next five years.
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