Old Mutual Wealth has told FTAdviser it is planning to create extensive factsheets detailing a far broader range of potential issues and questions for clients seeking to encash their pension post-April, going beyond “flawed” regulatory guidance.
The firm may not be alone, as one other major provider spoken to by FTAdviser has indicated it will likely produce a list of questions and warnings that exceed those outlined in a recent Financial conduct Authority policy statement.
Speaking to FTAdviser, Adrian Walker of Old Mutual Wealth said the regulator’s guidance for the so-called ‘second line of defence’, which requires providers to issue tailored risk warnings to clients, was “rushed” and “actually a bit flawed”.
Mr Walker said the watchdog’s rules, brought in without consultation at the end of February, a little more than a month both the pension freedoms come into force, “covered off what they considered to be... real base risk warnings”.
He cited the example of ‘future funding risk’ - the fact that if a flexible access option is utilised the annual allowance will fall to £10,000 in most cases - as an area that is not mentioned in the guidance.
“I think its incumbent on providers to actually go, ‘if we think there are others... that are relevant situations then we should include those risk warnings so we have given the customer the widest headline base information’.”
On 27 February, the regulator published its without-consultation intervention to offer additional protection to clients accessing income under new pension freedoms, including requiring providers to offer risk warnings where people state they have taken advice or guidance.
According to the measures, the only exceptions to providing the personalised risk warnings will be if an adviser is acting on a client’s behalf or if warnings have already been provided.
Crucially, the FCA said it will not provide a template of the content or format of what the ‘second line of defence’ warnings should look like, leaving it up to providers to design the wordings, although alerts can follow a templated format.
The regulator outlined a list of key questions and risk areas, ranging from health and tax implications to the implications for means-tested state benefits.
A spokesperson for the FCA pointed to the policy statement and in particular the statement that the risks and questions set out are “not an exhaustive or prescriptive list” and that firms are expected to “consider what they think is appropriate”.
Mr Walker said: “There is a need to make sure there was something there - and a month is not a long time to actually [design] some rules and make sure they are there.
“I think what they’ve actually done is covered off what they considered to be... real base risk warnings, but... if we think there are others that are relevant, then we should include those risk warnings so we have given the customer the widest headline base information.”