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Investment Pathways

by Emma Bond on 25·09·2022

FCA policy statement PS19/21 introduced the requirement for drawdown providers to offer

non-advised consumers Investment Pathways.  Consumers entering drawdown, or transferring assets already in drawdown, without taking advice, must be presented with four options on how they might want to use their drawdown pot. 

Reading that, you might think Investment Pathways are nothing to do with you or your advice firm and think no more about it.  Unfortunately, you would be wrong.  Although Investment Pathways apply to non-advised consumers, an adviser will need to consider the Investment Pathways a provider has in place when assessing suitability.  COBS 9.3.3A now states:

‘When a firm is making a personal recommendation to a retail client about the investment of funds in the client’s capped drawdown pension fund, or flexi-access drawdown pension fund, its suitability assessment under COBS 9.2.1R(1)(a) should include consideration of pathway investments.’

What does this mean for your advice process? To understand this, let us look at what Investment Pathways are.

Investment Pathways are investment solutions offered by the provider to match a particular objective in drawdown.  Consumers will initially be offered three options – to choose Investment Pathways, to choose their own investment, or to stick with their existing investments.   If the consumer chooses investment pathways, they must pick an objective in drawdown and are then offered a corresponding fund solution:

Option 1 – I have no plans to touch my money in the next five years.

Option 2 – I plan to set up a guaranteed income in the next five years.

Option 3 – I plan to start taking a long-term income within the next five years.

Option 4 – I plan to take out all of my money in the next five years.

The aim of Investment Pathways is to ensure that non-advised consumers accessing pension savings through drawdown, will be offered investment solutions that better meet a range of different objectives and that non-advised drawdown consumers will not be invested, or remain invested, in cash or cash-like assets unless they have made an informed choice to do so. The FCA found that 33% of non-advised pension consumers have their assets held in cash.

What is a non-advised consumer?

Providers must treat consumers as non-advised if they have not received advice on how to invest all, or part, of their drawdown pot.  However, there are some additional considerations:

  • For an advised client, if the adviser has not given a personal recommendation to move into drawdown in the last 12 months, the client will be considered non-advised.
  • If a consumer is paying an ongoing advice fee, this is not sufficient evidence the customer is being advised on a specific transaction. 
  • Investment pathways are available to advised clients.

What changes are needed to the advice process?

Similar to the discounting of a Stakeholder, or employer pension scheme, the advice process must now include consideration of the Investment Pathways offered by the client’s pension provider and whether these better meet the client’s needs.  On a practical level, this will involve obtaining details of the Investment Pathways offered by the provider.  If the provider has an advised proposition, the information will be easily available but if they only offer a non-advised proposition, it may be more difficult to obtain.  The Money Helper website has launched a comparison tool which provides details on some Investment Pathways being offered.  This can be accessed at:

You should consider areas such as charges, asset allocation, performance, appropriateness, and governance.  If you have a Centralised Retirement Proposition, this can be included as part of that.  Alternatively, this can be done on a case-by-case basis, with the reasons for discounting the Investment Pathways documented in the report. 

Not another “reason why not”!

Rather than seeing this as a “tick box” nod to compliance and the requirement to document something not being recommended, use this as an opportunity to emphasise the benefits of regulated financial advice and structured retirement income planning, which is arguably more important and more personalised in the decumulation phase of retirement than the accumulation phase.

Investment Pathways have two fundamental issues – the most obvious being they do not properly assess attitude to risk, or capacity for loss.  Secondly, the investment solutions within the Investment Pathways themselves are limited, generally being low-cost multi-asset funds.

A properly completed risk profile and capacity for loss assessment, together with an analysis of expenditure and detailed cashflow planning, can provide a comprehensive retirement income strategy and agreement with the client on the correct withdrawal rate. From there, a recommendation on an appropriate withdrawal strategy and the underlying investment solution can be made, with regular reviews and updates as circumstances change. 

This allows an adviser to differentiate their service from a non-advised solution, where costs are almost always going to be cheaper, and proving the overall value of the advice, not just the direct costs involved.

Emma Bond

Senior Paraplanner

The Timebank


This article first appeared in Money Marketing, 1st June 2022.

Sources and further reading:


FCA Policy Statement PS19/21 – Retirement Outcomes Review: feedback on CP19/5 and our final rules and guidance, July 2019.

FT Adviser – What advisers should know about the FCA’s investment pathway rules, February 2021.

AJ Bell Adviser Guide – Investment Pathways

Prudential Investment Pathways Training (online training video)