PensionsMay 4 2016

DWP and FCA won’t force IFAs into annuity resale market

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The Department for Work and Pensions and the Financial Conduct Authority (FCA) have confirmed to Financial Adviser they will not force advisers to help clients sell their annuities in the incoming secondary market.

Reforms unveiled in December will allow people drawing annuities to sell their contracts from 6 April 2017, extending at-retirement reforms announced in the Budget two years ago.

Advice will be compulsory for those with larger pots, but last month Financial Adviser reported advisers shunning talks to develop an annuity resale market over fears of future mis-selling claims in what could be a fatal blow to the Government’s plans.

Pensions minister Baroness Ros Altmann said advisers would keep the right to refuse clients seeking to sell their guaranteed retirement income.

She added: “I’m not saying this is straightforward, but if some advisers don’t want to advise on this they don’t have to – nobody is forcing them.”

The Government will aim to unite those wanting to sell annuities with advisers who can help, she said, adding that a recently launched consultation would give more detail on the kind of advice required.

The FCA said it would be taking a hands-off approach with respect to advice on the secondary annuity market, despite stating it posed “significant risk of poor outcomes for consumers”.

Maggie Craig, the FCA’s head of pensions policy, said the regulator was “not talking about additional requirements in terms of specialist adviser qualifications”, confirming “it will be up to advisers whether they want to get involved in this market or not”.

In April, the FCA revealed that providers would be responsible for checking pensioners had received the Government-mandated advice before they sold their guaranteed income.

David Henderson, independent financial adviser at Edinburgh-based Personal Money Management, said: “First of all the providers haven’t agreed on how a secondary market will work so everybody is working in the dark at the moment.

“Defined benefit to defined contribution works, but advisers need to be given clarity of due process. After the market is actually created, the FCA needs to put down what best practice will look like because it is extremely unlikely that because of the costs involved someone would reverse an annuity purchase.”

ruth.gillbe@ft.com