Commission on annuities could be abolished and pension pots of £10,000 or less will not be subject to the second line of defence regulations under proposals unveiled today by the FCA designed to address the risks and challenges faced by consumers in the new retirement market.
An FCA consultation launched today includes new requirements to help consumers shop around and questions the payment of commission on the non-advised purchase of annuities.
The FCA’s paper proposes 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;
It proposes retain 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;
It proposes 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.
FCA director of strategy and competition Christopher Woolard says: “Pensions are of fundamental importance and it is vital that the market works well for consumers. 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.”
ABI director of long term savings policy Dr Yvonne Braun says: “Following the biggest changes to private pensions for a generation, the retirement income market has adapted well but we must ensure that customers are protected and can get the best outcome for their retirement. We are pleased that the FCA is proposing rule changes to suit the new environment, and bring in additional clarity which the ABI has called for.
“A more fundamental look at retirement communications is needed, taking into account the important work the FCA is doing in general on customer communications and disclosure. Providers are keen to continue improving the way they communicate with customers to help them understand the options available to them.”