Defined contribution (DC) pension scheme trustees defaulting members into decumulation products could overstep the Financial Conduct Authority’s (FCA) advice/guidance boundary, the Pensions and Lifetime Savings Association (PLSA) has warned.

At its investment conference in Edinburgh, PLSA DC policy lead Ruari Grant, noted that “as trustees have to think about possibly defaulting members into retirement products, this could be construed as providing advice”.

If the DC assets remained within the scheme trustees would not have to worry about overstepping the advice/guidance boundary, he explained, but if trustees worked with third-party providers of decumulations products “then they may come under fire”.

Grant suggested that The Pensions Regulator (TPR) and FCA should work together to provide joint guidance to trustees.

“We want to see both regulators come up with guidance for trustees about how to comply without overstepping into advice/guidance lines as there is a lot of regulatory complexity to navigate,” he stated.

In September 2023, the government launched a consultation on plans for a new policy framework for supporting individuals on how to use their private pension savings at the point of access, which would require trustees to offer a range of decumulation services.

The proposals would look to place a duty on trustees to offer decumulation services, which are suitable for their members and consistent with pension freedoms.

Members would then be given the choice to use the default service offered by the scheme or access the products and services available under the pension freedoms if they choose.

Meanwhile in December 2023, the FCA launched a consultation on proposals to reform the advice/guidance boundary, which included plans for a new form of simplified advice.

The pensions industry has broadly welcomed the watchdog's proposals, suggesting that plans for targeted support in particular could prove to be a "turning point" for the UK's financial advice industry.

Plans for the advice/guidance boundary review were first announced as part of the Edinburgh reforms in 2022.

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