What proportion of assets under administration held on platforms arises from decumulation advice, including the amount held on the company’s top three platforms?
On platform selection, there is a particularly long list of suggested criteria, where companies can select up to five options, which include cost, service, functionality, tools, investment and product ranges, and financial stability.
The FCA might want to analyse if platform selection and review processes are designed to deliver good outcomes for decumulation customers.
Decumulation solutions
Here, the watchdog questions how a company’s products and underlying investments meet the different needs of consumers within their target markets, perhaps linked to any centralised retirement proposition.
Data is requested on the numbers of customers who were recommended annuities, drawdown, uncrystallised funds pension lump sums, pension commencement lump sums, lifetime lending products and blended solutions — split into various retirement pot sizes.
What proportion of decumulation clients were recommended to switch and/or consolidate existing pensions, and how many were recommended an investment pathway?
This is highly relevant to the consumer duty. Has the company specifically selected or constructed investment portfolios to meet the needs of decumulation customers and, if so, how many are available and which risk-rated categories are covered?
The percentages invested in various categories of high-risk investments are also being collected. The approach to and frequency of rebalancing is also explored.
Periodic review of suitability
This covers both the suitability of investments and the ongoing services. How many decumulation clients paid for an annual/ongoing review and, of those, how many did not receive one?
This is a clear pointer towards consumer duty value concerns.
For those in drawdown, the FCA wants to know how many reviews recommended buying an annuity. The relatively recent rise in annuity rates may skew the results here.
How many clients depleted their fund to the degree it can no longer meet their income needs, or had to reduce their income withdrawals because the previous level was unsustainable? Might these be considered foreseeable harms?
Income withdrawal strategy
This section looks at methodologies and options for delivering income across all forms of retirement income solutions (including non-pension) to deliver good outcomes, as well as how often these are reviewed against ongoing client needs.
Does the company use a standard withdrawal rate percentage? If so, at what level and how frequently is it reviewed? If not, how is the withdrawal set at individual client level?
Factors suggested include age, life expectancy, client withdrawal objectives, investment growth expectations and risk profile. There is also a question on approaches to managing liquidity.
Finally, the FCA asks whether companies have a standard amount of secure income a customer should have as a proportion of overall income. If so, how much, and if not, why not?
