Pension Changes to Enhance Consumer Protection

After much debate the FCA is proposing changes to the pension rules to address the risks and challenges faced by consumers in the new retirement market.

The FCA’s paper contains proposals designed to ensure that the pensions market works well for consumers, including new requirements to help consumers shop around, ensuring they have the right information to make informed decisions and to be able to understand the remuneration arrangements for the non-advised purchase of annuities.

The paper sets out expectations about how existing rules and guidance operate in the new environment, providing illustrative examples. It makes proposals for rule changes and asks for views from the industry and consumer groups.

Key proposals include:

  • Rules and guidance to ensure that consumers receive timely, relevant and adequate information to encourage the exploration of the full range of options for accessing pension savings and enable informed decision-making;
  • New rules on providing illustrations to members wishing to access pensions flexibly including guidance to set out the type of ongoing information provided when accessing pension savings while remaining invested;
  • 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.

The full FCA paper can be found here