With exactly a month to go until the new pension freedoms come into force, the regulator is rushing to ensure it has a package of protections to prevent mainstream savers doing themselves out of a decent retirement.
Following on from the hastily agreed rules for a ‘second line of defence’, we begin a round-up of this week’s news with the FCA’s move to ensure, as demanded by the legislation, that all final salary savers take full advice overseen from a qualified specialist.
1. GARs exclusion from advice demand.
Well, almost everyone.
Rules published by the FCA on Wednesday will mean that all transfers from final salary pension schemes fall under regulated advice, with most requiring oversight by a qualified specialist. Crucially, thise later requirement will not apply to those in a scheme with GARs.
This isn’t an exclusion from advice for investments into a certain fund group’s flagship multi-asset range, but rather from having to have advice to switch away from a scheme with a guaranteed annuity rate checked by a ‘pension transfer specialist’ holding the AF3 certificate.
Royal London had previously warned people looking to ditch their guaranteed rates for cash post-April and that GAR transfers should be treated the same as moves from defined benefit schemes.
To be clear, all transfers from DB schemes and money purchase schemes with guaranteed benefits will need to be advised under the FCA’s rules, including where the money is going to an occupational scheme regulated by the Pensions Regulator.
Elsewhere in terms of intervention, the FCA also announced this week that structured products firms could be hit with further fines, or forbidden from marketing products to certain consumers, if they do not correct a range of failings identified in a thematic review.
Several firms have been asked to “assess their historic approach to product design” to determine whether customers “may have lost out as a result of any deficiencies”. It added that this could result in “further remediation work... including redress for some customers”.
2. More pension price capping.
Reports this morning revealed that Labour is pledging to cap drawdown charges if they are elected in May, meaning further intervention in the new at-retirement market.
Ed Miliband has expressed concern that the freedoms, which the party have criticised as rushed and lacking consumer protections, could lead to retirees being ripped off by excessive charges, comments echoed by his shadow minister for pensions Gregg McClymont earlier in the week.
This comes at the same time as a Which? investigation found a wide range of charges for drawdown being offered through existing providers to mainstream consumers, including one levying 2.76 per cent. As a result, the consumer champion has launched its own campaign to cap income drawdown products.
Earlier this week, Standard Life became the latest in a host of providers to announce it will remove the fees currently applied to the flexible drawdown product on its wrap. Maybe this war is already being won?
3. FCA addresses suitability issues
On Wednesday the regulator’s technical specialist Rory Percival told an audience of advisers at Distribution Technology’s annual conference to “watch this space” when asked for guidance to help alleviate the “insidious expansion of suitability reports”.
His comments come in the wake of the revelation at an FTAdviser retirement conference last week, where during an audience Q&A the regulator’s director of policy David Geale said a discussion paper would shortly be published on the issue, focusing on product disclosure.
Most would agree that the sort of suitability reports we now see are not actually helping clients or protecting advisers, so it will be interesting to see how this develops.
4. Provider accused of bypassing advisers.
One provider, Aviva, was accused of bypassing an adviser by going directly to an employer with a group pension arrangement after the provider and IFA Daren O’Brien, director of Aurora Financial Solutions, agreed a deal.
In a report earlier this week the adviser said: “If Aviva now go directly to the client then we have done a lot of hard work for nothing. Employers come to us to get us to look at existing charge structure there is certainly no proactivity by providers to keep clients happy.”
It’s an old refrain, but follows fears late last month that providers will stray too far into providing advice in light of the new pension freedoms.
5. Woodford’s new venture: not an ostentatious design
Out sister title Investment Adviser got a sneak peak of Neil Woodford’s new offices, making a diversion from the current news cycle.
According to the report, ‘ostentatious’ was not the right word to describe the offices at Woodford Investment Management, which has a more laid-back agency feel than more traditional money managers.
ruth.gillbe@ft.com
