Out-Law News 2 min. read
27 Apr 2016, 4:48 pm
The six-month extension will apply to new rules on member communications and retirement income projections introduced to reflect the increased flexibility scheme members have had over accessing their savings since April 2015. Other changes, which include extending certain advice requirements to cover withdrawal via uncrystallised funds pension lump sums (UFPLS), will however have immediate effect, the FCA said.
Following industry feedback on its proposals, which were published for consultation last year, the FCA also confirmed that it would give firms "further flexibility" around the timing of retirement risk warnings.
"Here, we are allowing firms delivering retirement risk warnings to start asking the consumer questions before the consumer has decided how to access their pension savings; firms will still be required to deliver the risk warnings after the consumer has made their access decision," it said in its consultation response.
"We consider the change will improve the consumer journey. If firms use this approach they will be highlighting risks to consumers as they make their decision about how to access their pension savings, potentially better engaging consumers in the process and the decisions they have to make … Firms should not use this as an opportunity to retain customers and/or seek to sell specific products or options for accessing pension savings," it said.
It has also confirmed that personalised risk warnings will no longer be required in cases where the consumer has less than £10,000 in pension savings or 'safeguarded' benefits, with immediate effect. Providers will only have to ascertain whether these consumers have contacted Pension Wise or received financial advice, and will not have to ask them about certain risk factor triggers as is the case for those with larger pension pots.
From October 2016, product providers will no longer be permitted to send application forms for their decumulation products when they contact savers with 'wake-up' packs or reminders as that individual approaches their retirement date. The FCA said that the practice "undermines other efforts to encourage consumers to shop around". This new rule will apply even if the consumer has only been sent a wake-up pack in response to a request for a quote, and would cover small lump sum payments as well as drawdown and annuity products, according to the consultation response.
The regulator has, however, decided against creating new rules which specifically deal with so-called 'insistent clients' for the time being, after receiving a "diverse" range of responses to the consultation. The FCA does not force advisers to transact business for clients that choose to pursue a particular course of action against financial advice, but it said in its previous consultation that consumers could potentially see the failure of firms to undertake these transactions as "a barrier to using pension freedoms".
"While some of these issues have been around for a long time, we acknowledge that the introduction of pension freedoms has increased apprehensions of advising and transacting in some cases," the FCA said in its response. "This does create a risk that consumers will lose confidence in the ability of the industry to deliver on the promises of pension freedom."
"While we consider whether there is a need for us to undertake more work in this area, we believe there is a responsibility upon the industry itself to consider how it can deliver on customers' expectations. We do not see any case for moving away from client's best interests as a stating point for advice," it said.
The FCA intends to conduct further work and evidence-gathering around non-advised annuity sales, to be used as part of its planned 'retirement outcomes review'. This review, which will focus on the impact of the pension reforms on competition and switching in the market as a follow-up to the FCA's 2014 retirement income market study, is expected to get underway this summer.