Pensions  

Amendment to enshrine FCA guidance demands in law

Amendment to enshrine FCA guidance demands in law

Crossbench peer Baroness Sally Greengross has moved an amendment requiring the at-retirement ‘guidance guarantee’ to include more questions about sources of income other than pensions, in a move that would effectively enshrine the regulator’s policy guidance into law.

With official launch just 14 weeks away, detail on the actual content of the probably half-hour guidance sessions has still not been finalised, along with any of the official branding from the Treasury and delivery partners.

Ms Greengross’ amendment would see consumers being asked about other potential sources of retirement income, in addition to their defined contribution pensions. These could include property assets, savings and other investments, it stated.

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The Financial Conduct Authority’s policy statement (PS14/17) on feedback to the guidance guarantee reforms, published in November, sets out the content of the guidance and specifically makes reference to discussion of income sources other than pension savings.

The paper states that the session must “request information about the consumer’s financial and personal circumstances that is relevant to their retirement options including, for example... relevant information about the consumer’s financial and personal circumstances”.

It goes on to spell out that this includes a spouse or partner’s pension pots; state benefits and other income; whther the individual owns a property; capital expectations; tax status; and debt position.

It also suggests that personal circumstances should be taken into account, including whther or not the inidividual has dependants; the financial circumstances of the spouse or partner; state of health and potential long-term care needs; and the consumer’s plan and objectives for retirement.

As the bill passed through the House of Commons, Conservative MP for Reigate Crispin Blunt tabled his own amendment which called for assurances that things like equity release would be included in the session.

Including property in the sessions is seen by some as an admission that pensioners should seek to use their property to provide an income where appropriate, especially as in most cases housing assets will exceed pension provision.

Equity release providers are already gearing up for next April’s reforms, with Nigel Waterson, chairman of the Equity Release Council pointing out that housing wealth would be part of the initial checklist for the guidance guarantee, adding it would be “absurd if property wealth was not part of that conversation.”

Pensions minister Steve Webb heard the plea, but pointed out that it is more important that the guidance works in practice, and therefore further testing and refinement is crucial.

“We don’t want to overpromise what the relatively limited conversation can achieve... we can’t stretch this to achieve what it’s not set up to do.

“Shoehorning equity release into the guidance inappropriately will risk undermining it, if we bombard people then one of the worries is we just go back to where we started and they go back to buying an annuity.”

Mr Webb promised more detail before the end of the year via a - yet to materialise - progress update from the Treasury.