The Financial Conduct Authority (FCA) has published its proposed changes to the pension rules.
It is seeking to address the risks and challenges it sees faced by consumers in the new retirement market.
The FCA’s paper contains a number of proposals designed to ensure that the pensions market works well for consumers, including new requirements to help consumers shop around, ensuring the consumers have the information to make informed decision and a discussion around the remuneration arrangements for the non-advised purchase of annuities.
The FCA says its paper:
- Sets out its expectations about how existing rules and guidance operate in the new environment, providing illustrative examples.
- Brings forward proposals for changes to FCA rules.
- Asks for views on the range of information the FCA intends to examine as part of the follow up to its market study.
- Invites discussion including with industry and consumer groups on areas where the FCA is minded to carry out further work.
The proposals include additional rules and guidance for firms on how they should communicate with customers, a review of the retirement risk warnings, which were introduced in February without consultation, and new rules for pension freedoms communications.
The full consultation paper can be found here.
“Pensions are of fundamental importance and it is vital that the market works well for consumers,” said Christopher Woolard, director of strategy and competition at the FCA .
“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.
“We will continue to monitor the market as it evolves following the introduction of the government’s pension reforms to ensure that firms are helping consumers get the best outcome in retirement.”
The FCA says key proposals from the paper include:
- Rules and guidance to ensure that consumers receive timely, relevant and adequate information to both encourage consumers to explore the full range of options for accessing their pension savings and enable informed decision-making;
- New rules on the methodology for providing illustrations to members wishing to access their pensions flexibly including guidance to set out the type of ongoing information consumer are provided once they start accessing their pension savings and remain invested;
- To retain the FCA rules on the retirement risk warnings but to remove the requirement for a firm to go through the question and answer process of the rules when a consumer has a pension pot of £10,000 or less and where there are no safeguarded benefits;
- To add guidance to make explicit the application of existing rules in the context of pension reforms, particularly in relation to debt collection and debt advice;
- Restrictions on the promotion and distribution of high risk investments and amendments to the FCA’s definition of certified high new worth investor (HNWI) and restricted investor (RI).
The FCA has also asked for views on other areas where further action could be taken including the remuneration for arranging the sale of non-advised annuities, reminding firms of their responsibilities to ensure lifestyling strategies remain appropriate and possible changes to the product disclosure regime.