FCA targeted support and dashboards promise better outcomes

Proposed reforms could help more people achieve their financial goals. 

In 2020, the Financial Conduct Authority completed its evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review. The aim was to fully understand the impact of the reforms brought in to improve standards in the distribution of retail financial services products, with more transparency on product fees. 

A significant finding from this evaluation was that many consumers do not seek or receive appropriate help with their finances that would allow them to make better financial decisions. 

We know from our own Scottish Widows research^* that there is evidence that people are struggling to navigate their choices. Many don’t know how much to save or what their options are, advice can be inaccessible, and awareness of government support is low.    

The government’s Pension Dashboard programme is fast approaching the connection phase, which starts in spring, and will be followed by the first live testing later this year and full-scale implementation in 2026. Commercial provider dashboards will follow. 

Whether it be via the government’s Money Helper dashboard or commercial dashboards, consumers will be able to see all of their pension pots, their projected retirement income and their state pension all in one place, resulting in many more people engaging with their pension savings in a way never experienced before. 

However, increased engagement could also lead to further questions and concerns.  We know that many consumers can have a cognitive bias where they avoid information that they deem to be unpleasant. This can be known as the ‘ostrich effect’.  This manner of avoiding bad news, in the context of pensions, could lead to some avoiding looking at their pension statements through fear that they may not have enough money in retirement, and they don’t know what to do to improve their circumstances.     

This is where targeted support can potentially help. The FCA recently closed its consultation CP24/27: Advice Guidance Boundary Review (PDF, 1MB) – proposed targeted support reforms for pensions.   

We know that many people are unwilling or can’t afford to pay for full advice and are unclear where to go for support. Targeted support aims to bridge the gap between full financial advice and general guidance. Targeted support will help more people make better decisions about their pensions by providing specific, actionable suggestions based on data sets and tailored to people in similar circumstances.   

We welcome the FCA’s proposals and see targeted support as a tool which can be deployed widely to different customer journeys to enhance value for customers and help them meet their financial objectives.  

We see pension dashboards and targeted support working in tandem and anticipate positive outcomes for consumers. These include enhanced engagement and improved decision-making capabilities, as well as an overall clearer understanding of their pension savings and specific support detailing what people in their circumstances might do to improve their retirement income. 

Our research^** shows 38% of people are not on track to achieve a minimum lifestyle in retirement.  We believe that enhanced engagement, easily accessible tools and a targeted support framework can encourage people to engage and take positive steps to improve their financial lives.  

Alongside pension dashboards, targeted support is an important first step to close the advice gap and help consumers access the support they need to achieve their financial goals. 

Listen to Scottish Widows’ Pension Dashboard podcast, with dashboards expert Richard Smith. 

Sources:

*/** Scottish Widows Retirement Report, 2024