The regulator said the proposed rule changes, contained in a 139-page consultation paper released on Thursday, were designed to help consumers shop around more, and ensure they had access to more timely, relevant and accurate information in order to make informed decisions.
“Our proposals today are designed to ensure that consumers have access to products and services that are well governed and deliver value for money following the government’s pension reforms,” said Christopher Woolard, director of strategy and competition at the FCA.
Annuity fees
In the paper the FCA said it was considering changes to the remuneration arrangements surrounding the non-advised purchase of annuities, which could include a cap or a ban on commissions,
“Our proposals are designed to ensure consumers have access to products and services that are well governed."
It states that there is anecdotal evidence that in certain circumstances the cost of the commission can work out higher than the cost of advice. However, the regulator says it needs more evidence before any decision can be taken.
“Whilst it might be tempting to interpret this as a prelude to the FCA banning commission based annuity sales, its language is very cautious and it is at pains to highlight the fact that there is no evidence that such a ban is either desirable or necessary for consumers, ” said Tom McPhail, head of retirement policy at Hargreaves Lansdown.
Small pots
Another of the proposed new rules removes the requirement for a firm to go through the question and answer process when a consumer has a pension pot of £10,000 or less and where there are no safeguarded benefits.
Others include additional requirements and guidance for firms on how they should communicate with customers; there’s a review of retirement risk warnings, which the FCA noted were introduced in February without consultation; and new rules for pension freedom communications.
“The FCA seems to be saying ‘we see how the market is evolving and there are some issues that need to be addressed’,” said Adrian Walker, retirement planning manager at Old Mutual Wealth.
Safety first
There will be an extension to the restrictions on the promotion and distribution of high risk investments to certified high net worth investors (HNWI) and restricted investors (RI). A HNWI under FCA rules is someone with an annual income of £100,000 or more, or net investable assets of over £250,000.
The FCA said money held within a pension wrapper is to be excluded from the calculation of net investable assets for the purposes of the HNWI and RI certification. This is in order to prevent retirees with larger savings pots being exposed to these high risk sophisticated investments.
“We do not consider that the act of withdrawing funds from a dedicated tax wrapper (into which consumers have saved, over a number of years, specifically to provide for their retirement) alters the consumer’s overall wealth for the purposes of this calculation,” it said.
The FCA said it will be publishing a Retirement Outcomes review in 2016 which will look at product options, features, charges and access; consumer decision making and the impact of advised and non-advised distribution channels.
The FCA has opened a period of consultation on its latest proposed rule changes which will close on 4 January, 2016.
