The FCA has confirmed rules requiring all pension providers to offer ‘investment pathways’ have been delayed by six months until February 2021 due to the ongoing Covid-19 crisis.
Investment pathways were introduced to help retiring investors who aren’t taking financial advice to find a pre-selected investment strategy suited to their needs.
The regulator stated that the extended implementation period “recognises the operational challenges” of implementing new rules during the coronavirus pandemic, but also that “it does not relax any other regulatory requirements”.
AJ Bell senior analyst, Tom Selby, commented: “We are pleased the FCA is taking a pragmatic approach to investment pathways. Ploughing ahead with such a fundamental change at a time when all sectors are battling the unique challenge posed by the coronavirus pandemic would have been a mistake and risked creating poor consumer outcomes.”
The investment platform also suggested that rather than delaying investment pathways, the regulator should “take this opportunity to fundamentally rethink the reforms”.
Selby argued that if investment pathways had been in place before the recent market sell-off, thousands of drawdown investors would have been exposed to significant losses – with little understanding of why they were nudged in a particular direction.
He continued: “While investing in cash for the long-term clearly carries significant risk – namely where inflation eats away at your fund’s real value – there are perfectly logical reasons to hold a decent chunk of cash in your portfolio at any given time.
“Recent events have also reminded all of us that bull markets do not last forever, and when they end they can be painful for investors.
“Furthermore, the recent market volatility emphasises that individuals cannot be protected from all risks in drawdown. In attempting to create a ‘safe’ drawdown path for consumers, the regulator risks hard-wiring disengagement and encouraging people to invest in a way which might not be in their best interests.”
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