Personal PensionJan 21 2015

Webb pushes FCA to relax advice test for providers

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Webb pushes FCA to relax advice test for providers

Pensions minister Steve Webb has revealed he is pushing the regulator to allow more leeway for providers to push back on clients they believe may be making poor decisions when new pension freedoms come into force from April.

In an interview with FTAdviser, to be published tomorrow, Mr Webb defended plans to offer savers a one-time ‘guidance’ session through the Treasury’s Pension Wise service, amid claims from some quarters that this is inadequate and a ‘second line of defence’ is needed.

He explained that so far, everything is being done to maximise the uptake of the ‘guidance guarantee’, with new Financial Conduct Authority rules requiring this to be effectively signposted and recommended.

“It’s pretty full on: they [providers] have to signpost heavily and, if at the end of all that you are still insistent then we are already at the stage where the FCA has told the companies if they think the product... doesn’t look right then they can ask questions without anybody suggesting they are straying into advice.”

Mr Webb added: “My question is whether we can go further than that as far as saying that they should query whether this is the right product [for the client]. I’d like us to get as close to that as we can.

“I think the FCA is continuing to reflect on all of that and I hope they will have more to say - I can’t say more than that.”

Mr Webb’s comments come ahead of an FCA paper, due to be released tomorrow morning (22 January), which will focus on the distinctions between advised and non-advised services.

Earlier this month, Labour peers again voiced concerns over pension freedoms and called for a ‘second line of defence’ for pension savers at the point of sale of an at-retirement income product, to protect people from scams and pensions ‘liberation’.

While broadly welcomed, pension freedom and choice reforms have come under scrutiny amid claims they will make life easier for unregulated pension liberators, who will no longer even be forced to set up as a pension scheme when savers are able to access their cash legally.

Adrian Boulding, pensions strategy director at Legal and General, told FTAdviser that at the moment insurers can stop “the dodgy ones”, but that from April they will be obliged to transfer pension pots into legitimate bank accounts, not knowing where the money will go thereafter.

Some providers are already planning new ways to tackle the non-advised versus advised dilemma.

Royal London revealed in November last year it is working on ways to give “retiring non-advised customers” access to independent and impartial advisory firms at a lower cost than in the open market.

At that time, the group’s latest report for the year to September detailed the plans, with chief executive Phil Loney explaining to FTAdviser that while the firm supports the guidance guarantee it does not believe it will be enough.

“The sheer amount of lethargy and consumers lacking confidence will be a problem from next April, so we want to come up with other ways to make sure retirees get some form of financial advice.

“We’re in conversation with various organisations which have models that would allow advice to take place online or over the phone, thus reducing costs.

“This will still be paid-for advice in line with the RDR, but the cost of sourcing clients would be reduced and it should enable better tariffs, with customers playing less than in the open market.”

The full interview with Mr Webb will be published on FTAdviser tomorrow.

ruth.gillbe@ft.com