The pensions sector has responded positively to the Financial Conduct Authority's Retirement Outcomes Review, which has highlighted a number of areas in communication, product transparency and decumulation choices that need addressing to maximise DC scheme benefits.

The director general of the Association of British Insurers (ABI), Huw Evans, called the report and consultation “considered”, and praised the latter for looking to establish a set of investment pathways for retirees heading into drawdown. “[This] is a common sense approach which should strike the right balance between engaging them in decision-making while taking away some of the complexity,” said Evans.

Evans also said that the ABI was in favour of more targeted communications for those getting closer to retirement, putting him in agreement with the former Pensions Minister and current director of policy at Royal London Steve Webb, who called the FCA’s recommendations a “proportionate and balanced package”.

Commenting on the report’s finding that consumers who do not take financial advice are at risk of losing out, with 94 per cent not shopping around at retirement, Webb said: “The biggest risk is […] savers locking their money into low-return cash investments for decades. Making sure savers do not sleepwalk into cash investments is an important step, as well as simplifying choices for savers at retirement.”

In attempting to stem the tide of cash deposits, Nigel Peaple, director of policy and research at the PLSA, said that the regulator was “absolutely right” to consult on introducing investment pathways through which providers would offer a small number of options that meet the majority of people’s needs.

“While people should always be encouraged to make active decisions, the PLSA has long said pension trustees and Independent Governance Committees (IGCs) should be able to signpost savers to suitable products which meet Government standards,” said Peaple. “We also agree with the regulator’s proposals to give IGCs greater oversight over decumulation options, and to improve consumer engagement.”

On the topic of simplifying drawdown costs, Zurich head of retail platform strategy Alistair Wilson welcomed the move, describing it as the “right way forward”.

“The FCA found 44 different charges consumers need to consider when in drawdown. These additional and sometimes unexpected costs can include charges for ad hoc withdrawals, receiving paper statements or when moving into drawdown. Having a single annual cost would be more transparent and help consumers to compare costs between different drawdown providers,” he said.

However, the FCA’s work has not been immune from criticism, with David Everett, a partner at LCP, saying that the recommendations in the FCA’s report were long overdue.

“All of this should have been thought through as part of the pension freedoms package. And although it is now being addressed, there are two more rounds of consultation — one starting today and another next January — with no clear indication of when product providers will need to deliver on these pathways,” said Everett.

“Once more we have a demonstration of how we in the UK eventually get to the right answer, but not always by the best route.”

In addition, Work and Pensions Committee chair Frank Field said: “The FCA reports devilishly glacial progress, albeit now in the right direction. Report after report shows that inadequate protections are in place for too many savers. Yet again, the FCA has found that people are losing out in tax and investment returns by hiding their pensions in cash bank accounts. Yet again, the FCA has found that people are being ripped off by unjustifiably high and complex charges. But the FCA wants another year to mull over a charge cap while life savings are shamelessly milked. There has been more than enough warning. They should just introduce it."

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