In a consultation published today on the guidance guarantee at the heart of the new proposals, the regulator revealed it will publish a consultation in “due course” which would, among other things, take into account the results of the second thematic review of annuity sales practices.
While the review is likely to focus on drawdown, which is set to become more of a mainstream product under the new rules, the FCA also stated in the paper it is now discussing how it should regulate the new uncrystallised pension lump sum option.
Until formal rules are drafted, the watchdog said it experts firms to treat uncrystallised pension fund lump sums - which have been characterised as allowing pensions to be treated like a ‘bank account’ - as they would drawdown, which for many providers will require advice to be taken.
Experts have argued the new access option could be the riskiest of all that are inaugurated under the new rules and could lead to poor outcomes, due to being essentially unregulated and open to abuse.
The FCA said: “Our view is that the risks and issues for consumers are broadly similar to those with income drawdown products.
“Our intended approach will therefore be to treat these options consistently in our regulation of income drawdown products and we urge firms to treat it as such as we work with the industry on developing the rules.”
The thematic review on annuities is due to report next month and is likely to point to potential mis-selling of annuities to retirees who would have qualified for an enhanced annuity, but were sold a conventional annuity after a process involving no health or lifestyle questions.
Earlier this year, business development manager at Scottish Life Fiona Tait, became the latest expert to tell FTAdviser the regulator needs to change its stance on at-retirement advice in the wake of Budget reforms to remove an implicit pro-annuities approach.
The regulator said pensions at retirement are a high priority area, both from a policy and supervisory perspective.
Its paper stated: “We are gathering intelligence on the development of products, distribution propositions and the behaviour of firms in this market to inform our policy and supervisory approach.”
The FCA also said it will be alert to scams in the new pensions and retirement income market, adding: “We will actively monitor the market for firms falsely behaving in a way which indicates that they are giving a pensions guidance service under arrangements with the Treasury.”
Included in the report are new standards for pension provider firms to direct their customers to the guidance service at retirement.
In light of this, the regulator outlined risks to consumers in the new environment. Their particular concerns were broadly around the following two scenarios:
• consumers who choose not to take up the offer of the pensions guidance service, might go on to access the funds in their pension without understanding the implications of their decision, and with no check of whether they have considered all relevant factors;
• consumers who do take the guidance then seeking to buy a product from their existing provider, or a new provider, that does not meet their needs.
ruth.gillbe@ft.com
