New rules aim to encourage savers not to leave their pots languishing in low-return cash funds

Companies managing money in the UK’s £384bn market for post-retirement funds will face strict new rules governing their investments, regulators confirmed on January 28.

The rules, which follow on from plans first announced in June last year, are aimed at consumers who pass retirement and leave all their savings in cash. The Financial Conduct Authority, the UK’s financial watchdog, is worried about consumers “holding their funds in investments that will not meet their needs”.

The regulator is responding with rules designed to force the industry to spur consumers into making investment choices. The measures could drum up new business for fund managers offering sophisticated post-retirement investments.

Jon Greer, head of retirement policy at wealth manager Quilter, said: “Investment pathways may be more of a challenge for some [pension] providers and will require a shift to having to manufacture or link to an appropriate investment solution, particularly for direct-to-consumer [pensions] that are agnostic when it comes to investment choice.”

Since the government changed pensions rules in 2015, meaning retail savers are no longer heavily encouraged to buy annuity contracts that provide guaranteed incomes for life, sales of post-retirement investments known as “drawdown” funds have boomed. Sales hit £22.4bn in 2018, up by a third on the previous year, according to FCA data.

But around a third of consumers do not take any advice on where to invest that money, and one in three of that group, “were unaware of where their money was invested”. Many are left in cash funds after making no other choice, according to the FCA. The FCA wants to tackle this with a new rule that savers have to actively choose cash funds.

Read more @fn London