A cooling-off period for pension funds access is imperative if clients are to avoid the consequences of acting in haste and not taking advice, Kay Ingram has said.
LEBC Group’s divisional director of savings and investments said: “We are aware of the need to ensure that decisions made at retirement take into account the need to make income from pensions sustainable throughout life. Our concerns are that without regulated advice, individuals will make hasty decisions now that they later regret.”
She added that following substantive engagement with people approaching retirement, there was widespread confusion, and many had not fully factored in income sources or the tax implications of withdrawing funds.
A period of reflection, and a simple statement of the consequences of early access, was paramount she said, and would prevent people from acting in haste and regretting decisions in the long term.
Her comments came after chief executive Jack McVitie stepped up his call for the government to introduce a 30-day cooling off period with a letter to FCA head Martin Wheatley.
Mr McVitie said he welcomed the FCA urging people to seek advice and to be vigilant to protect themselves from fraudulent activity, as well as its warnings about pension scams.
On 25 March Mr McVitie sent an open letter to chancellor George Osborne and shadow chancellor Ed Balls calling for them to support the call.
According to FCA regulations, cash Isas have a 14-day cooling-off period as do unit trusts, Oeics, share Isas, Sipps and EISs, but only if these products are advised upon.
Critical illness, life insurance and income protection and policies with an element of protection cover have a 30-day cooling-off period. Life and pensions policies also have 30 days, regardless of whether advice was given or self-bought.
According to the Money Advice Service, providers that sell Isas, investment funds, policies and other structured investment and savings products must provide clear information, set out in a key facts or a key investor information document and a chance for customers to change their minds. Cooling-off periods last for 14 or 30 days, depending on the product.
Right to Reply
When asked, an FCA spokesman said it would be responding to Mr McVitie’s letter to Mr Wheatley in “due course”.
He added: “We have already introduced retirement risk warnings and have committed to a review of our at retirement rules in the summer.”