OpinionNov 14 2014

Pension reforms: Risk vs ‘responsibility’

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These comments were made during a panel debate earlier this week, which thankfully featured the calm head of Personal Finance Society chief executive Keith Richards. He took the chance to agree that advice is preferable - and agreed drawdown should not be sold on an execution-only basis - but warned against promoting advice on the basis of future claims.

He used that word again. Mr Richards said part of being in a society with freedoms such as those at the heart of the at-retirement reforms means “making important decisions and taking some level of responsibility”.

Because some clients with, say, £50,000 to invest - or lower, as the FCA now says this an adequate lower threshold for drawdown - will come into adviser offices and demand help to access their money, while eschewing an annuity.

Given the regulator’s erstwhile bias to the latter, how you handle some clients could define the way the reforms will pan out for many. Get your disclaimers ready - and prepare for the claims down the line.

The FCA is already talking of the need for enhanced consumer protection as a result of the “asymmetry of knowledge between producer and customer”. Facing questions on future redress, director of policy David Geale talked about adviser indemnity insurance, capital adequacy, and the Financial Services Compensation Scheme.

Unlike Mr Richards, the word Mr Geale did not use when talking about the consumer was ‘responsibility’. Some MPs even suggested the government could face claims for what I suppose we’ll have to brand ‘mis-guiding’ pensioners.

These reforms are to be celebrated, but we cannot have it both ways. Of course we must protect consumers, but we must also ensure that if we allow people to make their own choice, we do not in the process abrogate their responsibility for the decisions they make.