The regulator has previously expressed concern about consumers moving into drawdown and holding their funds in investments that will not meet their needs.

The FCA is now proposing that firms offer customers who do not take advice a range of investment solutions that broadly meet their objectives, otherwise known as “investment pathways”.

The watchdog is also proposing that consumers’ pension investments are not defaulted into cash savings unless the customer actively chooses this option.

The regulator says the measures are a part of its wider pensions strategy, and follow from the Retirement Outcomes Review report last summer.

The FCA also announced new rules on the “wake up packs” that must be given to consumers as they approach retirement, and on the disclosure of charges by pension providers.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “The Pension freedoms give consumers more flexibility in how and when they can access their pension savings; but that also means they have to make more complicated choices.

“Our Retirement Outcomes Review identified that many consumers are focused only on taking their tax-free cash and take the ‘path of least resistance’ when entering drawdown.

“This can often mean that the rest of their drawndown pension pot is not invested in a way that meets their needs and intentions. 

“We found that around one in three consumers who have gone into drawdown recently are unaware of where their money is being invested. 

“This leads to poor consumer outcomes.

“Our proposals on investment pathways will help non-advised drawdown consumers select from four relatively simple choices, designed to meet their broad retirement objectives so that they can maximise their income in retirement”.

The FCA estimated these changes could benefit people by up to £25m a year.

The FCA is proposing that firms will offer ready-made investment solutions (investment pathways) to the estimated 100,000 customers that enter drawdown without taking advice each year.

Customers will choose from four objectives for their retirement pot – and be offered a solution based on their choice.

Smaller drawdown providers will be able to refer investors to another provider or the Single Financial Guidance Body’s drawdown comparator tool.

The FCA says it expects firms to challenge themselves on the level of charges they impose on investment pathways.

If it identifies issues with charges, the regulator says it may move towards imposing a cap.

The FCA is also proposing rules that will require firms to give consumers warnings about holding investments in cash and to improve disclosure of charges.

All the new proposed measures are are in the consultation paper.

The FCA is inviting feedback from stakeholders by 5 April before it finalises the new rules.