Personal PensionJul 29 2014

FCA should force providers to ask ‘health questions’

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Providers should be required by the regulator to ask “five or six health questions” of every client prior to selling a pension saving product in order to make plans for an effective ‘pension passport’ a reality, according to the Pensions Income Choice Association’s Stephen Lowe.

Mr Lowe, who is also Just Retirement’s group external affairs and customer insight director, said Pica is set to come up with a standard industry template of what a pension passport should look like.

This follows comments from pension minister Steve Webb MP in response to the consultation on new pension freedoms that hinted the government may back the roll out of such a system to help clients shop around the broader range of products more effectively.

Two years ago, Pica suggested to the Workplace Retirement Income Commission that shopping around for an ‘open market’ annuity option, which had received poor take-up, could be made easier by replacing the default annuity option with a ‘pension passport’.

Mr Lowe said it would update a previous plan it put together for the passport, but that as before it would likely include a range of information on, for example, health, that providers do not currently gather and which the FCA should compel them to collect.

He said: “What we will do is tease out what we think could be a standard template, adopted across the industry. Accountability will rest with the providers. ABI is pro an idea that a pensions passport could be a pragmatic solution to help consumers and to help them aggregate their pension pot.

“We are hoping FCA rules will help this and can use their influence to make it mandatory that providers must ask certain questions before a sale. The guidance guarantee is not mandatory so what is the second line of defence?

“The FCA consultation said it will be a statutory obligation to look at taxation - what tax will be paid if you withdraw the whole fund and we think it should be an obligation to add on a further five to six questions such as asking about your health.”

Pica and the Annuity Exchange are also likely to pitch for the right to provide the Money Advice Service’s adviser directory when it sends out a tender, according to the director and owner of the company behind its own service.

The Money Advice Service is looking to launch its own free directory, although concern has been raised over the additional criteria it may set for entry into the list. Mas told FTAdviser that details regarding the adviser directory will be published shortly.

Last year, specialist annuity software firm the Annuity Exchange was selected to build and run Pica’s retirement directory. Stuart Bayliss, the director and owner of the firm, believes both Pica and his firm are well placed to run Mas’s listing “when they eventually send out a tender”.

In January, Pica’s retirement directory ‘Pick-A’ had around 1,000 retirement specialists. Tom McPhail, Pica chairman, has previously said the eligible criteria will need to be relooked at post-Budget but the legwork is done and a system is in place.

Mr Bayliss said: “Once they eventually send out a tender, we [Pica and the Annuity Exchange] will tender for it.

“The Annuity Exchange has a good view of both providers and IFAs but we need to somehow have a picture of the journey that the consumer is about to go into, not just stuttering in and out of guidance.

“I think a directory is part of that journey but there should be as few as possible directories in the market to stop confusion amongst advisers and consumers. Mas as one government-sponsored provider that will be co-ordinating the delivery of the guidance, should make the directory available to all clients and providers.”