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Consumer financial advice and guidance for high risk DC savers
The growth in Defined Contribution (DC) pensions alongside the introduction of new pension flexibilities has introduced an additional layer of complexity around the use of retirement savings. While the flexibilities have provided individuals with a greater number of options, they have also placed more responsibilities on them and introduced greater risks to both the individual and the State. In light of these developments there has been an increased focus on the role of regulated financial advice, alongside the introduction of free guidance for individuals. There is a need for financial advice and guidance to reach individuals who are most at risk of making sub-optimal decisions around their pension savings
This report was sponsored by LV= and looks to explore the demand for and supply of financial advice, and some options for bringing these in line with each other. This research provides an overview of some of the options with the aim of stimulating discussion around these, rather than providing any quantitative analysis of the likely outcomes of each option. Further investigation would be required to evaluate each option in order to assess the potential outcomes from these..
Chapter one considers the demand for financial advice and guidance in the DC market and identifies individuals 'at-risk'.
Chapter two provides an overview of advice and guidance provision alongside consideration of the factors that have influenced the supply of these services to date, specifically the regulatory framework. It goes on to outline some of the more recent developments, including the development of robo-advice and online guidance that has arisen as a result of, or alongside the pension flexibilities.
Chapter three considers how the gap for consumer financial advice for the high risk savers might be reduced. It looks at how demand and supply for financial advice might be influenced. It goes on to consider the potential role for defaults in the consumer advice market.
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