Poor advice row over drawdown
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The FSA is suggesting that advisers are to blame if their clients are stuck in income drawdown due to the increase in the minimum retirement age from 50 to 55, warning they should brace themselves for complaints.
HM Revenue & Customs confirmed this week that drawdown investors aged between 50 and 55 face a 55 per cent unauthorised payment charge if they buy an annuity or switch to another provider.
The industry, led by Sipp trade body the Association of Member Directed Pension Schemes, had been seeking clarification on the matter, which many warned goes against the FSA’s treating customers fairly regime.
LV= head of pensions Ray Chinn says: “The TCF guidance clearly indicates that customers should not face unreasonable post-sale barriers to change product or switch provider. HMRC is ignoring this.”
But the FSA says this reflects poor advice. A spokesman says: “The Government announced the changes to the minimum retirement age in 2003 so people should have been advised about changes and how it would affect them. If they feel this has not been the case, they should consider a complaint to the Financial Ombudsman Service.”
Standard Life head of pensions policy John Lawson says advisers are getting a raw deal.
He says: “This is daft. These people are already in drawdown - nobody is trying to beat the system. A lot of pension experts could not come to conclusions on this because the law was very hard to interpret so I think it is pretty rough to point the finger at advisers for this.”
Amps chairman Robert Graves says: “The common-sense view is that these people should not be caught so it probably would not have occurred to many advisers. This flies in the face of fairness to the consumer and policy objectives and I think that the FSA is being disingenuous in blaming advisers.”
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Readers' comments (19)
Sean | 13 May 2010 12:43 pm
Typical FSA. Last time I looked you base advice on the legislation in place at the time.
More retrospective reviewing from the FSA.
There was no guarantee that change would occur - I recall that residential property was going to be allowed in SIPPs until about 4 months before A-Day.
This sums up the arrogance of the FSA. Its a pity we cant do job swaps with them - but as most of those who tell us how to work dont hold relevant industry qualifications I dont think they would pass the application process to become registered individuals.
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Same old blame game | 13 May 2010 3:32 pm
When those who make the rules break the rules or just change them to suit then the rules are an a$$!
Pension simplification - ASP rules change, anti forestalling, lack of clarification on pension investors ability to switch between plans is all becoming obvious that the rule makers of both HMRC and the FSA can do what they want and when.
In typical FSA parlance sue your adviser for everything cause the British Government is responsible for not making the rules, not changing the rules, not clarifying the rules and not providing poor governance of banks and macro economic policy.
Bet this post Tory government FSA quote must rile all the Tory voters who thought the FSA would be run out of town when DavCam got in charge.
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Fraser Brydon - IFA | 13 May 2010 3:41 pm
I have a number of crystal balls for sale,any IFAs interested in buying one....here we go again,it was an aspiration not etched in stone, it requried a change in leglislation.
My suitability letters will so have more disclaimers than a Tesco car park....
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Julian Stevens | 13 May 2010 3:41 pm
More ammunition for the FSA's Final Solution to "the IFA problem" (as perceived by the FSA).
Whatever goes wrong, however the goalposts are moved after the original advice was given, however hopelessly we (the FSA) failed to offer any guidance or anticipate possible changes, no matter ~ just heap it onto the IFA sector and make them pay, pay, pay until they're so completely broken that they can't carry on.
That aside, just how many people entered Income DrawDown before the age of 55 and now aren't prepared to wait until then to annuitise despite advice not to because HMRC has changed the rules? How many clients are likely to blame their adviser for HMRC having moved the goalposts? Virtually none, I'd bet, so in reality the prospect of any complaints is remote.
But the fact that the FSA seems eager to ensure that clients could complain against their adviser and hold them responsible is sadly typical of what we've come to expect from Canary Wharf.
It isn't paranoia when they're really out to get you and anyone who thinks the FSA isn't out to get us is either a Perfect Being or living in Cloud Cuckoo Land.
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Martin Tilley | 13 May 2010 3:43 pm
I agree, it is all very well to say that a change will happen but until the legilsation is passed and clearly understood, it is difficult to plan.
I would ask the question why the legislation is always drafted to be scheme specific, when there is no good reason for this and a breach of customers (taxpayers) rights if it is. This is a constant within pensions legislation, will they never learn?
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Anonymous | 13 May 2010 3:51 pm
For Gods sake give us a clear set of rules and a path to run on for pensions. This is just ridiculous.
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Anonymous | 13 May 2010 4:01 pm
Oh dear, another example of how those who cannot do their job, blame others.........IE FSA unable to regulate and therefore not only did not properly signpost, but once again failed to deliver industry guidelines over this issue that they clearly knew was going to happen apparently by their comments!!
If that was the case they are guilty of absolute negligence of their duty to protect the consumers they are here to protect by setting clear guidelines. Even the Pension companies agree for goodness sake!! Own up and look after those who you have let down and don't try to make IFA's as your scape goats!!
Shame on you.
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David Drane | 13 May 2010 4:24 pm
The FSA is going to have to seek Ministry of Justice authorisation as its way of encouraging people to complain without good reason is on par with the claims companies.
Soon you will get cold phone calls from the FSA telling clients that they can claim from a pot of money against their IFA.
In reality, I cant see anyone complaining and its just the FSA trying to justify itself to the new Govt. "oh look Mr C & Mr C, we do need to exist as those horrible IFAs are mis-selling pensions". Hopefully the two Cs will ask, how many complaints has their been....answer zero.
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David Rackham | 13 May 2010 5:31 pm
Proves the FSA is not an independent regulator of HMRC or Government. The FSA is there to make sure someone else pays for HMRC's mistakes.
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Paul Harding | 13 May 2010 5:35 pm
“The Government announced the changes to the minimum retirement age in 2003"
Er, EXACTLY!! The law was intended to change the minimum RETIREMENT AGE. Anyone in drawdown has ALREADY retired, vested, crystalised, whatever you want to call it.
So what on earth has a change to the min retirement age AFTER youve vested got to do with them??
The law must be appallingly badly drafted (not a big surprise as it was gordons gang wot dun it) but was there no scrutiny by ministers, civil servants, the Lords, HMRC, the girl guides?
I know we IFAs are usually responsible for everything including world poverty, nuclear proliferation and probably scurvy in the 16th century, but surely there are more culpable targets that us on this one?!
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