Once again the week’s news was dominated by government and regulatory action on pensions, with inboxes flooded with responses on the secondary annuity market consultation and the start of a consultation on pension exit fees for those trying to access the freedoms.
Of course, there were other themes feeding through over the last five days, so as ever, here is our round-up of what you need to know:
1. Exit fee investigation enrages industry.
On Wednesday (17 June) the chancellor announced a consultation into the fees levied by some pension providers on policyholders trying to gain early access to their pots upon turning 55 under the new freedoms, rather than waiting to state pension age in line with how the policy was priced.
Economic secretary to the Treasury Harriett Baldwin urged the Financial Conduct Authority to be on the lookout for instances where firms levy “unnecessary and unfair” charges in the meantime.
The Treasury warned that they could impose a legislative cap on charges, which in some cases can be up to 20 per cent of the fund value. However, the following day, several insurers and their industry body hit back at the plans, suggesting that few pay the fees and that they are contractually valid.
Some smelled discord in the approach of the FCA and the Treasury, but it’s hard to shake the feeling further action will be forthcoming to clear the path for vesting savers.
2. Secondary annuity market also enrages industry.
In what could be mistaken for a theme in itself, several insurers and industry bodies also cried foul as the consultation period ended for the Treasury’s look at the feasibility of letting those already locked in annuities that want to also access the at-retirement reforms.
Ever since ex-pensions minister Steve Webb proposed some form of secondary market for the contracts, the industry has been split between those happy to give the people their freedom and access a new revenue stream, and others who are less confident of profits and therefore raise concerns over customer value for money.
Those with perhaps less vested interests also pitched in this morning, with the Citizens Advice Bureau pointing out the potential drop in income for many and associated longevity risks, while Tisa called for a statutory override to protect consumers from the vagaries of an open market.
3. Lots of complaints, but FCA given thumbs up on handling.
The Complaints Commissioner’s annual report revealed that while the FCA represented just over half of all complaints with 61 received during the last financial year - plus 11 relating to its predecessor - not one was fully upheld and only nine decisions were overturned.
Interestingly, despite the advisory industry’s many regulatory protestations, only one official complaint was made by an individual financial adviser.
Complaints commissioner Antony Townsend concluded by stating that while there was a tendency for regulators to be over-cautious about admitting error and too ready to exclude matters early in the process, the vast majority of complaints against them are “handled well” and the large majority show no signs of significant failings.