The aim will be to assess the advice consumers are receiving on their income needs in retirement.

The watchdog calls the review “a piece of discovery work” designed to understand more about how financial advisers provide retirement income advice and to assess the quality of outcomes consumers are getting.

The review follows the impact of the Government’s Pension Freedom reforms introduced in 2015, the FCA says. 

The freedoms are believed to have caused major changes to how pension savers access their retirement savings with more leaving their money invested for longer periods and many using income drawdown.

The FCA said today: “Given the wider range of retirement options available, it is vital that consumers get good advice at the point they first access their pension savings and, where relevant, on an ongoing basis.

“Since 2015, there has been a significant shift to consumers drawing an income from pension funds which remain invested. Advice in this area can be complex, so it is important firms understand the needs of their consumers and ensure their advisory solutions deliver consistently suitable advice.”

The FCA’s previously planned work on this topic (known as ‘Assessing Suitability Review 2’) was paused during the Covid-19 pandemic.

This new thematic review will investigate how the retirement income advice market is functioning and will also focus on how firms are responding to changing consumer needs as a result "of the rising cost of living.

The review will be linked to the FCA’s lifetime mortgages work it committed to in its 2022/23 Business Plan, to get a clearer understanding of outcomes for consumers in later life. 

The regulator will use the findings to help inform its future strategy for the sector. The results will also be an important indicator of how firms are implementing the Consumer Duty, it says.

The review of retirement income advice will be launched in Q1 2023 with findings published in Q4 2023.

Firms selected for the review will be contacted early in 2023 and the FCA will also talk to trade bodies.

Jon Greer, head of retirement policy at Quilter, said: "Pension Freedoms radically changed the retirement landscape and have no doubt been instrumental in helping to give people more choice and flexibility in retirement. But with greater choice, comes more complexity and its right that this Thematic Review announced by the FCA looks at how financial advice is helping consumers navigate these difficult and often perilous decisions."

"The results of the review from the FCA will also be a bellwether for how well firms are implementing Consumer Duty as the new regulation requires advice to be outcome-based and avoid foreseeable harm. Advisers will no doubt have an eye on how they document their advice and the solutions they use through the consumer duty lens with particular emphasis on protecting their customers from foreseeable harm."