Don’t blame advisers for non-advised drawdown!


“Savers accessing the burgeoning non-advised drawdown market are failing to engage with information, investing in unsuitable investments and risking running out of money in retirement, an FCA probe has found”. – John Greenwood – Corporate Adviser.

You can read the FCA probe –

Non-advised drawdown pension sales review: summary of findings


Should anyone be surprised there is a burgeoning problem?

It may sound obvious, but we have around 25,000 advisers in this country and around 450,000 people arriving at retirement each year. We do not have enough advisers so most people are facing the nastiest hardest problem in finance, with little more than a helpline to their DC provider.

  • We should not be surprised that people are not shopping around – where is the shop?
  • We should not be surprised that people are taking their “pension commencement lump sum” and rolling up the rest of their money without much engagement – what is there to engage with?
  • While I “take comfort” that pension providers are meeting their obligations to their policyholders/members – I find little evidence of any innovation and can’t see what remedies the FCA have in mind for their current retirement outcomes review.

Let’s be clear about this. There is no shop for those who want to explore their options to shop around in. Money Supermarket, Go Compare and Compare the Market are staying away from all this with good reason. This is a nest of vipers.

So far, we have seen a benign market since we switched our outlook from pensions to pots, but there is a gathering consensus that so far, investors have got luck- this article- again in Corporate Adviser last week, – is well worth a read. Also worth a read is the FCA/tPR joint paper on a strategic approach to the retirement income sector.

There is nobody prepared to stick their head above the parapet and tell ordinary people how to go about turning the non-cash element of their pension pot into income. Abraham Okusanya is teaching advisers but this is a brutally hard thing to do.

And the FCA will struggle to find any kind of innovation , since the “thousand flowers that were sprouting in 2015” had a massive dose of DDT sprayed over them when the Government cancelled project Defined Ambition in 2015.

In short – there is a market failure happening today

The £34.25bn that has transferred out of DB into DC – is part of this market failure

The 10m new recruits to DC saving – are also part of this market failure.

Even those in well-heeled properly funded occupational DC schemes are part of this market failure.

The DC world is “all dressed up with nowhere to go”. As in Australia, so in the UK, the mature end of the DC market has spurned “annuities for freedoms” but should now be singing “is that all there is?”.

And you laugh at collective solutions?

The guys who spend their time at the FCA’s Canary Wharf offices, dissing CDC – the SIPP providers, those operating commoditised fund platforms, the managers of large advisory groups and those with vertically integrated decumulation propositions – I hear you laughter!

I hear your dismissal of collective DC and the scheme pensions it can offer. I hear your claims that we will find a way to provide each individual with a “default decumulation pathway” and I see you running around like so many Mr Micawbers – convinced that something will turn up.


the improvident Micawber

But nothing is turning up.

Meanwhile , the FCA watch on , as the individual market fails to innovate and more and more people stop saving, draw cash and wait for the pension to turn up.

But nothing is turning up.

If all that was coming up to retirement – were diddy little DC pots accumulated from the first five years of Auto-Enrolment,  I would not be worried. But many people who are retiring today, are doing so with great big pots. Some have been saving in DC all their lives, some have transferred DB savings into a DC pot and some people have been feather-bedded by paternalistic employers who have been paying into their DC plans at substantial rates.

For these people, nothing is turning up.

We urgently need a way of converting pots back into pensions. We have rejected the annuity and we can’t get our heads round unadvised drawdown. There aren’t enough advisers to go round and people are uncomfortable paying advisory fees out of smallish pots. Smallish pots used to mean less than £150k but with the glut of CETVs with an average pot size of £450k, I suspect that the bar for advised drawdown now sits rather higher.

The FCA should be aware that the DWP are now consulting with the CWU and Royal Mail to get rules in place which will allow 145,000 Royal Mail staff to de-cumulate their DC savings as scheme pensions.

They should also be aware of the DWP’s aim to make the rules they are creating , available to other organisations who could offer scheme pensions from DC pots.

There is – within the scope of what has been openly discussed at Work and Pensions Select Committees, at forums of the Friends of CDC and in the numerous private meetings with the DWP I’ve attended, the capacity to offer a “wage for life” solution to those millions of people who have , are or will reach the end of their retirement savings.

Don’t blame advisers for non-advised drawdown

It is not up to advisers to offer pro-bono consultancy to Government on non-advised drawdown. Nor is it the advisers fault that there are not enough of them to go round. Nor is it the advisers fault that they are busy advising those with pots of more than half a million pounds and leaving those with smaller pots to their own devices.

Nor is it the fault of Go Compare, Money Supermarket or Compare the Market that they haven’t set up pension shops.

The market failure that the FCA are hinting at, and will explore more deeply (I hope) in the Retirement Outcomes Review proposals, can only be addressed by a return to collective pension solutions.

Otherwise, Britain will degenerate into the mess that Australia and the USA are finding themselves in, countries where Super and 401k are creating plenty of pots but precious few pensions.

We now need a collective solution for those currently in non-advised drawdown

The purpose of tax-incentivised private pensions is to provide people with an income for life, not a pot of inheritable wealth or finance for a Lamborghini.

While I am in favour of giving those people who refuse to spend and those who insist on spending, their retirement savings, the chance to do so;- I am not in favour of making the default decumulation option, a pot of money sitting with an insurance company or on a SIPP platform- with little or no advice.

For the vast majority of ordinary people, a collective means of converting pot back into pension is needed, and needed as soon as possible.

I call on the FCA to spend time with the DWP in exploring the opportunities CDC brings to help ordinary people create wage for life in their post – retirement years.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, pensions and tagged , , , , , , , . Bookmark the permalink.

1 Response to Don’t blame advisers for non-advised drawdown!

  1. John Mather says:

    Before you jump from frying pan to fire you need to fix the system that has failed so many baby boomers just when they thought they had an income for life.

    The markets are less about investing and more about speculating. When I entered the business in 1973 changing 25% of the portfolio years called churning accusing managers of having a fee motive for action, not an investment motive. Look at the rates of change today. Speculation loses money as speculators share in a zero-sum game less the fees.

    Given the gravy train and retrospective taxation of funds, it is no surprise that the funding assumptions are failing members.

    Follow the big money effects not the activities of a few opportunistic low life crooks.

    Why has there been a 90% reduction in adviser numbers since 1988? Simple, the risk reward is not worth it and “New Model Adviser” is as meaningless a term as Brexit, another box with a label that no one troubles to open and define

    As a nautical man, you must recognise what is happening here. It is called pi**ing into the wind. Relief in the short term but a mess when you look what you did

Leave a Reply