It will bring about important changes to communications with pension scheme members around their retirement options; offer many the option of default investment pathways; and nudge others away from defaulting into cash.
The Review’s breadth is impressive, but has left me wondering whether an area which will be of growing importance in coming years is at risk of being neglected.
‘Income withdrawals’ is defined in the FCA’s glossary to include “after that person’s death, his surviving spouse, his surviving civil partner or anyone who is, at that time, his dependant, or both”.
This means many of the FCA’s requirements in relation to individuals entering income withdrawal apply equally to death benefits as they do to ‘member benefits’.
This creates issues that need to be considered.
Starting with two relatively minor points:
That final point raises the broader question of whether the FCA’s current, or proposed, rules regarding individuals entering drawdown are as appropriate as they might be for those receiving benefits as a spouse, dependant or nominee.
The rules are designed for situations where the person entering drawdown is over 55.
Younger nominees and dependants are potentially going to have completely different motivations and considerations when looking at their drawdown fund than someone taking their own benefits at 55 or above may have – these could include supplementing earnings, management of income tax, inter-generational planning or use of funds as a saving source in their own right, among many other possibilities.