Industry experts say the consultation paper Distribution of Retail Investments: Delivering the RDR, goes little further than the feedback statement published in Nobember 2008. The latest consultation asks whether stakeholders agree that Adviser Charging should be applied where individual advice is given on GPPs and whether the principles of Adviser Charging should be applied to non-advised GPP business, and if so how.
The FSA is asking for responses on the issue to be filed within a very short timeframe, by July 31, 2009, and says it wants to publish draft rules for GPPs by the end of the year.
It is also consulting on the concept of ‘arranger charging’ whereby in situations where advice is not given to employees, any intermediary remuneration would be negotiated between the intermediary and the employer, even if it was ultimately obtained from contributions or scheme funds. The FSA says this could be disclosed to potential GPP members alongside the usual Key Features Document. However it cautions that if it does not apply the principles behind Adviser Charging to unadvised GPP business, it may run the risk that its proposed rules on Adviser Charging could be circumvented.
The consultation paper also says employees being steered towards GPPs should not be treated as receiving a personal recommendation from an adviser unless one to one advice is given as well.
Raising a number of problems with applying the RDR to the workplace, it also flags up the issue that a too onerous regime could push schemes towards trust-based arrangements, which fall outside its remit.
The consultation paper says: “At this stage, we do not know what shape and level of charges will apply to personal accounts, but it seems likely that there will be circumstances where recommendations to employers to establish GPPs as qualifying alternatives to personal accounts could be justified (for example, where an employer wants to contribute more than the maximum amount proposed for personal accounts). Equally, there could be recommendations given to employers which are more questionable, such as recommending a GPP that is more expensive than personal accounts
on the grounds of wider investment choice (something not likely to be needed by
most consumers eligible for personal accounts).We want to be confident that our rules protect consumers in such situations and reflect the eventual charging structure of personal accounts.”
Trevor Matthews, chief executive officer of Friends Provident says: “I am pleased the regulator’s announcement proposes a way forward for adviser charging for GPP schemes and would support the inclusion of non-advised sales of them under this approach.”
“The FSA has expressed concern in the consultation paper whether some firms may shift their focus from retail investments to protection products as a result of the RDR to the detriment of consumers. In the light of the well known and huge protection gap in the UK I believe this concern may be overstated.”
Gareth Evans, head of corporate affairs at Royal London says: “We particularly welcome a clear indication that the regulator is actively seeking to extend the principles of Adviser Charging to the group pensions market. The market for GPPs is extremely competitive and is clearly subject to some of the issues that RDR is seeking to address. The fact that FSA is looking to keep GPPs on the same implementation track as the rest of the reforms is very good news.