26th January 2015
The City watchdog, the Financial Conduct Authority (FCA) has called on the UK’s pension providers to outline their plans to introduce additional protection for those accessing their defined contribution (DC) pensions from April, when the new freedoms go live.
From April retirees will be able to access their nest-eggs and do with them as they see fit but under the new additional protection rules firms will be required to ask consumers about key aspects of the circumstances that relate to the decision they are making about their pension pot.
These include issues such as health and lifestyle choices or marital status. This will come into force from April.
Providers will also be required to give relevant risk warnings, such as warning of the tax implications of their decisions, in response to answers from consumers. Firms must also further highlight the availability the government’s new Pension Wise scheme or regulated advice.
Christopher Woolard, director of strategy and competition at the FCA said: “The decisions consumers make about what to do with their pension pot are important and in some instances these choices are irreversible. We want to make sure that people have the help they need to make those choices.”
The FCA said that firms will be required to deliver these messages in a direct and simple language which will be set out when the new rules are published.
Commenting on the FCA’s move Tom McPhail, head of pensions research at Hargreaves Lansdown said: “This second line of defence – which the FCA is now intending to call ‘Additional Protection’ – is exactly what we have been calling for. Without this, it would have been far too easy for pension providers to carry on rolling their customers over into poor value or inappropriate retirement income products. However it will also raise the bar, making it more challenging for pension companies to deal with their customers; some may decide it just isn’t worth the effort.”