RegulationOct 2 2015

More ‘fundamental look’ at retirement comms needed

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More ‘fundamental look’ at retirement comms needed

Various industry stakeholders have warned that a “more fundamental look” at retirement communications is needed, following the Financial Conduct Authority’s publication of its post-pension freedoms consultation.

Yesterday (1 October), the regulator published its post-pension freedoms consultation, which looked at possible rule changes to improve the retirement market. Here are a selection of responses to the paper from across the industry:

Yvonne Braun, director of long term savings policy at the Association of British Insurers.

“Following the biggest changes to private pensions for a generation, the retirement income market has adapted well, but we must ensure that customers are protected and can get the best outcome for their retirement,” she stated, adding that proposed changes will bring additional clarity which the ABI has called for.

“A more fundamental look at retirement communications is needed, taking into account the important work the FCA is doing in general on customer communications and disclosure.”

Peter McDonald, pensions partner at PricewaterhouseCoopers.

“The pensions system will only work if employers, providers, intermediaries and savers are encouraged to take part, with clear governance and guidance that meets everyone’s needs,” he commented, pointing out that it is in everyone’s interest that people are more incentivised to save towards their retirement.

He argued it is vital that there is more focus on improving communication, financial education, access to education and guidance, with technology embraced as a way to make people’s retirement planning easier.

“People are used to running their lives via technology and there is no reason why they shouldn’t be able to manage and plan for their retirement in the same way as they run their bank account.”

Adrian Walker, retirement planning manager at Old Mutual Wealth.

“Anything which may prompt people to seek financial advice is a good thing,” he suggested, stating that not only do people need to decide how much income to access, they need to also consider whether taking money out their pension is the right thing to do from an estate planning perspective.

The firm also welcomed the specific proposal to make it clear that creditors must not pressurise customers to use their pension savings to repay a debt, with an extra layer of protection meaning consumers can now check whether their adviser is authorised by the FCA to give them such advice.

“People need to consider the best way of paying off their debt, and whilst many will prefer to pay off lump sum amounts to free themselves from the burden of debt, it may make better financial sense to pay off smaller amounts from income to help ensure a more sustainable pension income in the long-term,” said Mr Walker.

“Taking out lumps of capital will erode the income over the longer term and it is good that consumers will have extra protection.”

John Fox, director of Liberty Sipp.

Addressing the paper’s proposals around forcing self-invested personal pension providers to disclose the amount of interest they retain on client accounts in projections to create a level playing field, Mr Fox opined that the retaining of interest has been the industry’s “dirty little secret” for years.

“For too long, too many providers have been quietly pocketing the interest earned on their clients’ money - and burying the practice in the small print,” he said, calling the regulator’s announcement a great day for the industry.

“The prospect of providers who choose to make money this way being forced to be completely transparent should be welcomed by both advisers and clients.

“The greater level of disclosure may initially surprise some clients, but it will allow both them and their advisers to compare projections more accurately.”

peter.walker@ft.com