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Experts back Wheatley over Budget pensions due diligence fears

Experts have backed FCA chief executive Martin Wheatley after the regulator raised concerns about providers’ due diligence as they rush to push new pension products to market in time for April.

In an exclusive interview in last week’s Money Marketing, Wheatley said he feared providers were “struggling to do the level of proper due diligence testing on the products they would need to do in order to feel comfortable”.

He added: “It creates problems for us if providers rush out products that are not properly thought through”.

The Lang Cat principal Mark Polson says some providers could be cutting corners as they work flat out to be ready with new offerings.

He says: “I’m seeing a lot of very stressed proposition teams, peddling quickly to meet the deadline with sexy new stuff. If they can do it safely that’s great, but basic compliance with the regulations should be what we’re shooting for.”

Polson says it is the established life companies with long back books of pension policies that are most at risk because their older technology is harder to adapt.

He adds: “Providers who are saying they are not ready shouldn’t be penalised by advisers for being honest. It’s time to take a long view.”

But Standard Life head of pensions strategy Jamie Jenkins says the company “already has all the parts – workplace pensions, investments, drawdown” and has been spending “more time on conduct risk and due diligence”. However, he says “with new players coming into the market, there are always new risks”.

Aviva head of pensions policy John Lawson says: “Some people will be thinking their survival depends on it and that’s where you get potential issues. Martin Wheatley is right to be concerned – when firms are at their most desperate they do things that are less considered.”

Santorini Financial Planning managing director Matthew Walne says: “There’s always a danger of products being rushed but providers would be mad to do so, considering the legislation still hasn’t been finalised. That said, the established providers haven’t got the stranglehold on the market they once had, so they will be vying for market share.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. It just shows the risks of government making politically motivated announcements without worrying about the consequences. Aside from hastily constructed products, another thing that seems to be very rushed is the Advice Guidance service. One of my clients is a Citizen Advice Bureau Adviser. At his client review meeting on Tuesday we discussed the new service that is being rolled out in April, and neither he nor any of his colleagues knew the first thing about this!!! So that should be interesting…….

  2. I agree with Brian… get the foundation secured, build the structure, put on the roof, make sure the heating and electricity works, the taps run and the roof doesn’t leak. Test it and double test it… tighten a few screws etc… get the project signed and approved….

    Then and only then take it to market!

  3. So why does Mr W not have the providers send in the products and due diligence carried out et al to the FCA so they can give it the green, amber or red light. That way the regulator would be perfectly happy that any products brought to market are fit for purpose. Simple solution

  4. “what we’re shooting for” !! Does this herald a return to the regulator’s intention to shoot first and ask questions later. Be afraid, be very afraid.

  5. IMHO its not and I repeat not ! changes in legislation or G Osborne’s off the cuff changes to rules !!

    Its the bloody FCA rule book !!! all 8ft of it !!

    Let us not forget any new innovative product pushed forward has to meet the requirements of this rule book why do you think the FCA have set up a dedicated team to help people to navigate it ? this in turn has increased lead time 10 fold or even longer.

    In simple terms this rule book is the result of 30 years of additions which in fact means what started of as something as simple as a house has turned into a very confusing town (say Milton Keynes) almost impossible to navigate for people not used to the area without the use of sat nav !!

    Martin Wheatley should stop blaming every-one else for problems of the FCA’s making irrespective of the name changes over the past 30 years !!!

  6. Anyone for tennis?

  7. A good advice firm will conduct its own due diligence on any new products that are brought to market, and then decide whether they are fit for purpose or not. Most of the new arrivals will be ‘hybrid’ products anyway to start with, that combine annuity with drawdown in some way.

    My concern is the pension providers and what they are doing to retain their OWN pension book clients. For example what would their own client drawdown look like? Would it be as good as some of the annuities that were offered to those who failed to shop around? We know what the FCA report said about those sales practices in the past.

    What about the new UFPLS ad-hoc withdrawal. How will these be governed? What information will be provided to clients to help them make good decisions? What will the remaining pension fund (and its charges) look like after the fund stays in an old fashioned, life-styled contract for a good few years more!

    We worried about them selling their clients annuities. Now it is annuities, drawdown, UFPLS, etc…

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