Life and pension companies have generally welcomed the Financial Conduct Authority’s ‘second line of defence’ rules, although many are still grumbling about the ‘piecemeal’ approach and lack of time to update customer communications ahead of 6 April.
On Friday, the regulator published its without-consultation intervention, offering additional protection to clients accessing income under the at-retirement reforms, including requiring providers to offer risk warnings where clients state they have taken advice or guidance.
The tax implications of the various retirement income drawdown options and health considerations for those purchasing an annuity will form the basis of the second line of defence.
Providers will need to ask limited personal questions and offer warnings specific to the method of access, but no template of the content or format was provided.
Steven Cameron, Aegon’s regulatory strategy director, said that while both Pension Wise and the FCA’s retirement risk warnings serve a useful purpose in protecting customers, when all the different elements are put together the end to end process could be quite lengthy, especially if the customer starts with written communication.
“For someone keen to access some income, that could be very frustrating,” he commented.
“Given time and stability, there’s no doubt this process can be engineered to run more smoothly, both protecting customers and meeting their needs. As with many current developments, the key is digital.”
Mr Cameron added: “But the last minute, piecemeal approach we’re seeing, risks some frustrated customers come April.”
Jamie Jenkins, head of workplace strategy for Standard Life, told FTAdviser that there were no great surprises, given the ‘Dear CEO’ letter and previous dialogue with the industry.
“It’s all fairly sensible, although we would have liked it a bit earlier. Tweaks will now be needed, as there’s one or two extra questions we’ll need to include, but we already had all the component parts; it’s now just a focus on proper support for consumers.”
Claire Trott, head of technical support at Talbot and Muir, complained that the statement was not as detailed as providers were led to believe and she thought the questions and associated risk warning should be set out in more detail to ensure that all consumers are given the same information in response to the same question.
“I suspect because of the timing of the announcement this would not have been possible for them to do. That said, we as providers have to do this in the next few weeks without their help.”
She added that where someone has taken advice or guidance they will already answered similar or more detailed questions which could lead to a lack of willingness for clients to answer them again.
“Where someone has taken advice, it is however usually the adviser who contacts us with the forms to process and therefore would be excluded from this process, but this will not be the case where they have just taken guidance.”
peter.walker@ft.com
