FCA under fire for lack of universal pension rules

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FCA under fire for lack of universal pension rules

Pension experts have argued the Financial Conduct Authority should come up with universal retirement income rules that would allow advisers and providers to better assist savers.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, said when the industry wants to come up with a bullet proof rule to say "this is a safe recommendation" that everyone can use, the only phrase the industry can come up with is “pile into your pension.”

Speaking during a panel debate at the Association of British Insurers Long Term Savings Conference yesterday (4 July), Mr McPhail highlighted the difficulty of trying to reach those people not served by formal advice.

“Unless we give everyone personalised recommendations [advising] doesn’t stack up.

“But we can’t give them the kind of guidance [listing universal rules] that we would want to. We are still hamstrung at a regulatory level from giving people the information they need.”

Richard Parkin, head of pensions policy at Fidelity International, said many people were disappointed by how the Financial Advice Market Review has so far failed to solve this problem.

Mr Parkin said: “Retirement is very different for people and expecting to have a single rule of thumb is difficult.

“Having a rule of thumb though could help people though, such as if you retire and take income later you will have more income.”

Mr Parkin said there needed to be more rules of thumb established by the FCA to allow advisers to assist people to achieve a better outcome than if they tried to navigate pension freedoms alone.

However Abraham Okusanya, founder of FinaltiQ Limited, said advisers and providers shouldn’t wait for the FCA to produce such rules.

He expressed frustration at "consultation after consultation" about advice and assisting savers with pension freedoms, but said people needed “advice” now and it was wrong for the industry to wait to deliver this.

Mr Okusanya said: “What is wrong with rules of thumb for pensions - simple rules that people can work with?

“Providers can wait for regulators to come up with what people can and can’t do but the danger then is people don’t get that support and the risk from both a regulatory point of view is people say you kept all this cash on your platform ‘Why didn’t you help me?’”

But Mr McPhail said it wasn’t as simple as providers or advisers stepping in to help people.

He said the challenge to the industry is if advisers or providers contacted a client and flagged that someone was heavily in cash then it would be considered a personal recommendation.

Therefore, Mr McPhail said the provider or adviser would be liable for the recommendation if the saver later complained that this message failed to result in the best retirement income outcome for them.

Martin Rumsey, director of KPMG, agreed that the current regulatory regime did not allow advisers or providers to assist the bulk of those trying to make sense of pension freedoms.

Mr Rumsey said a lot of the language of the Financial Conduct Authority was around achieving the “best outcome” for at-retirement savers without acknowledging the cost of achieving that is too great for the average person.

He said the FCA needed to come up with a regulatory regime that allowed advisers to just assist savers with getting a “better outcome” than they would do if they received no assistance at all.

emma.hughes@ft.com