Investment pathways will add ‘layer of confusion’ – OpenMoney

OpenMoney has warned that the FCA’s investment pathways will add “another layer of confusion” for people planning their retirement.

The FCA’s investment pathways are due to launch on 1 February 2021 but OpenMoney has branded the regulator’s plans as a poor substitute for regulated financial advice.

In 2019, the FCA proposed new rules that would mean firms should offer ready-made investment solutions to the estimated 100,000 customers that enter drawdown without taking advice each year. These plans indicated that customers would be offered a range of ‘investment pathway’ solutions based on their choice.

The rules had been due to come in to force on 1 August 2020 but were delayed by six months due to the coronavirus pandemic.

OpenMoney co-founder, Anthony Morrow, acknowledged that anything to improve financial outcomes for people in retirement should be welcomed, but warned that “at-retirement planning is complicated and these decisions are often irreversible”.

“Making a choice without taking advice, even when following a provider’s pathway, has the real potential to leave you worse off in retirement,” Morrow said.

“By simplifying pension decisions down to a limited number of routes, many people could miss out on an alternative solution which may be a better option for them – for example a combination of guaranteed and non-guaranteed drawdown.
“Sadly, I think investment pathways will simply add another layer of confusion for many people and are a poor substitute for regulated financial advice. The FCA should instead be looking at ways to ensure the financial services industry delivers affordable advice so everyone at retirement can be confident they are making the best decisions about their future income.”

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