STATEMENT: FCAs simplified advice mustn’t come at the expence of new risks

Closing the advice gap mustn’t come at the expense of opening the door to new risks

Rob Shipman, Group CEO, The UAP Group and Director, Alltrust Services Limited comments on the FCA’s consultation on how to make it easier for firms to give more simplified forms of financial advice to consumers, announced today:
 
“We broadly support the FCA’s intention to make it easier for firms to provide more simplified, individualised pensions advice, recognising the clear need to address the long-standing advice gap. Many consumers lack access to affordable, tailored support and would benefit from more accessible interventions that help them make informed decisions about saving, investing, and drawing their pension benefits. A more flexible framework has the potential to increase engagement and improve outcomes, particularly for those who may otherwise rely on generic guidance or remain disengaged altogether.
However, pension planning, particularly in the context of SIPPs, can be inherently complex. One of the most significant areas being tax planning. Decisions around contributions, withdrawals, and investment strategies are closely intertwined with an individual’s broader tax position, including marginal income tax rates, annual and lifetime allowances, tapering rules, and the interaction with other assets and sources of income. The government’s plans to reduce the salary sacrifice allowance in 2027 adds further to this complexity. Even seemingly straightforward decisions, such as how much to contribute or withdraw in a given year, can have unintended tax consequences if not considered holistically. Therefore, any form of simplification must be approached with care.

Consumers may reasonably assume that a personalised recommendation takes into account their wider financial and tax position, when in reality it may be based on a narrower set of inputs. This creates the potential for misunderstanding, suboptimal outcomes, and, in some cases, unexpected tax liabilities.

The FCA must therefore emphasise the importance of clear boundaries, transparent disclosures, and robust consumer understanding. It is essential that investors are made fully aware of the scope and limitations of any simplified advice, including where key factors like their broader financial circumstances have not been considered. Advisers will also likely need to have strong governance frameworks in place to ensure that simplified propositions remain appropriate, consistent, and aligned with good customer outcomes.

Firms need confidence in where simplified advice sits within the regulatory perimeter, and how liability will be assessed if outcomes fall short. Without this, there is a risk that firms either adopt an overly cautious approach or inadvertently expose consumers to inconsistent standards of support.”