Sofa delegates have been warned that advisers will face a host of new compliance risks on post-retirement advice if compulsory annuity purchase at the age of 75 is scrapped.
Speaking at the Sofa inc-ome-drawdown conference in London last week in a presentation entitled, Prevention is Better then PI insurance, Syndaxi partner Robert Reid warned that advising clients over 75 on fund switching is fraught with danger.
It is also expected that a new breed of flexible annuity contracts will complicate post-retirement advice, making it riskier than ever to advise on the increasingly difficult area.
Reid said: “It is all very well talking about ending compulsory purchase at 75 but how many IFAs would be comfortable advising a 85-year-old on switching their funds? Advice to people aged over 75 on switching funds is fraught with danger.”
In a presentation on the alternatives to drawdown, TaxBriefs technical consultant John Housden told delegates that the definition of annuities is changing, with the Inland Revenue allowing more flexibility.
Housden warned that, with added flexibility, newer and more complicated products have been launched. These include the Prudential's rec-ent product offering Survival Credits and a range of changeable investment options.
London & Colonial's Gib-raltar-based product, to be set up soon, offers policyholders death benefits through insurance company shares.
Following these themes, many conference speakers highlighted the importance of guaranteeing compliance and generating audit trails that would satisfy any regulatory review.
Many IFAs, including Int-elligent Pensions managing director Steve Patterson, who spoke at the conference, str-ongly believe that the FSA sees drawdown as a high-risk product which is likely to be highlighted for review and new regulatory requirements.
Patterson said: “From discussions we have had with the FSA, there is now likely to be a much greater emphasis put on the need for a systematic approach to reviewing arrangements.”