‘Freedom first wave miss second line of defence’
Pension providers will not have enough time to inform consumers set to retire on 6 April about the FCA’s ‘second line of defence’ – mandatory additional protections around the new pension freedoms which come into force on that date.
It is an FCA requirement for providers to send out letters to all clients six weeks before their due retirement date reminding them of the availability of Pension Wise, and recommending they seek guidance.
So the first wave of pensioners to be affected by the pension freedoms should receive the letters by 23 February.
However, the FCA’s board will not be setting out the final details of the second line of defence until it meets on 26 February, which means providers will not be able to include them in the first official letters.
The additional protections mean providers will have to ask clients about their circumstances, give risk warnings, as well as reminding clients again about the Pension Wise guidance service.
Philip Brown, head of retirement propositions and change at LV=, said he was concerned about the tight deadline. He said: “This could be a challenge for the wider industry in terms of timescales as we will not get final sight of the rules until March, which leaves us with a very tight window to implement the changes.”
However, he welcomed the fact the FCA was setting ‘additional protection’ for savers as it would help ensure that those approaching retirement could take full advantage of the pension reforms.
In terms of what it can offer people retiring on 6 April, Mr Brown added: “LV= will be ready, as well as bringing a new proposition and new adviser tools to market.”
Helene Barnes, senior PR manager at Friends Life, said: “We are supportive of the second line of defence principle and any initiative that introduces appropriate consumer safeguards.
“But we require the details from the FCA in order to introduce these changes and acknowledge that the deadline of making this happen for 6 April is tight.”
However, those providers who wish to send out information on the second line of defence can do so in addition to the six-week letters required by the FCA.
Steven Cameron, regulatory strategy director at Aegon UK, said: “For those retiring in April, we will already have sent out wake-up packs before the FCA announces any new rules.
“We’ve already given detailed thought as to how to help our customers navigate through their wider retirement options and are reflecting this in sweeping changes to wake-up packs and supporting digital material. We’ll revisit these once the FCA communicates its requirements.”
According to Rod McKie, head of retirement propositions at Zurich, the provider believes the FCA’s decision to define the minimum requirements for providers will be helpful, adding: “This will minimise the risk of customers encountering a disparate level of experience and we look forward to this clarity soon.”
Right of reply
A spokesman for the FCA said: “There is a role for the provider to play in helping people to understand the implications of their chosen route.
“Now we know what Pension Wise will look like, the industry has asked for greater clarity on what it should do to ensure customers are fully informed about the risks they face before they take a potentially irreversible decision.
“This is why we have decided to introduce these new rules now.”
