Adviser fees will be one of the many charges included in self-invested personal pension (Sipp) providers’ cost breakdown for consumers in drawdown, according to the Financial Conduct Authority (FCA).
In the FCA’s final policy statement of its Retirement Outcomes Review, published yesterday (July 30), the regulator proposed this information should be provided annually and include all fees presented as a pounds and pence cash amount.
The FCA stated: “When disclosing actual costs and charges, firms must state whether any adviser remuneration has been paid out of the product.”
In a separate paper on non-workplace pensions the regulator said yesterday it planned to collect and collate all fees from Sipp providers and then aggregate this information into a single dataset and make it publicly available, making it easier for individuals to compare providers and value for money.
The FCA has previously consulted on proposals to require providers to supply information on the actual costs and charges consumers are paying in drawdown.
These requirements will not apply to other retirement products such as fixed term annuities as costs and charges are built into the price.
Gareth James, head of technical at Sipp provider AJ Bell, pointed out the requirement to disclose charges will apply at Sipp wrapper level as well as on investment accounts which sit within the wrapper.
“Adviser charges will fall under this. So providers will also have to include adviser charges paid from the Sipp wrapper, or any taken on underlying investments, in this single pounds and pence figure," he said.
But the FCA allowed providers to disclose charges across the whole Sipp, not just the drawdown pot.
This was after providers had flagged that lots of the charges were levied across the whole Sipp, which made allocating charges difficult.
However, charges disclosed under this method may not be accurate.
For example, if a consumer has a drawdown pot of £5,000 as part of an overall pension worth £1m then a provider could potentially end up disclosing charges of £20,000 on the whole fund, which would appear odd on a drawdown pot of this size.
Some respondents to the consultation had also been concerned breaking down charges could be difficult to achieve.
For example, there would be difficulty identifying and obtaining all the charges for buying, holding, maintaining and selling commercial property.
The charges associated with this include fees from solicitors, surveyors, bank lenders and property managers which would be hard to collate.
Responding to this feedback, the FCA amended its rules to say, “if a firm does not have the information necessary to comply with COBS and provide a breakdown of all charges, it must take reasonable steps to obtain it.”
The FCA added: “If, despite having taken reasonable steps, the firm is still unable to comply with COBS (Conduct of Business Sourcebook) [...] the firm should provide consumers with a reasonable estimate or provide a written statement to explain what costs and charges are not included in the figure provided.”
The FCA has introduced a 12-month implementation period, starting from 1 August 2019, to “give firms time to make the necessary systems changes required to meet these new rule requirements”.
amy.austin@ft.com
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