Pension passports bid to protect retirement pots

The Financial Conduct Authority (FCA) has been looking at how the sector has been working since the pension freedoms were introduced in 2015.

It wants to see improvements in the clarity and timing of communications from firms before people make decisions about what to do with their pension pot.

The FCA is proposing that “wake up” packs should be sent to people from the age of 50 and then every five years until the customer has fully accessed their pension pot.

These would have to include a single page summary in clear language, sometimes called a pensions passport, and firms would also include specific retirement risk warnings at the same time as the new packs.

The pension freedoms give over-55s a wider range of choices over how they use their pension pot, rather than being required to buy an annuity retirement income.

The FCA said the proposed new communications would help consumers engage with the risks and choices they face and prompt them to access support and guidance.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “We know that the choices introduced by the pension freedoms have been popular with many consumers.

“However, they’re now required to make more complicated decisions than ever before.

“Many people need more support when making choices.

“The measures we have outlined today will help them think about that earlier, create investment pathways to help them with their choices and make costs and charges easier to understand.”