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FCA ‘concerned’ savers giving up guaranteed income

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The FCA is probing pension firms on their communications around guaranteed income benefits, based on concerns consumers do not fully understand the benefits they are giving up.

In its latest regulatory update, the FCA says it will review how adequate pension firms’ customer communications are in non-advised sales as well as looking into what oversight firms carry out.

Since pension freedoms were brought in, the regulator says it has seen an increase in the number of customers giving up guaranteed income benefits.

The FCA says: “We are concerned that customers may not fully understand the nature and value of the guarantees they are giving up.

“We will also look into what communications firms have made to customers with guaranteed income benefits ahead of the proposed introduction of the secondary annuities market.”



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Issue number 1 – consumers often think they are getting advice when, in fact, they aren’t (or perhaps they are, and they think it’s independent when in fact it isn’t).

    Issue number 2 – if a firm is not giving advice, is has no duty to ensure the consumer is aware of potential pitfalls of the decision they are making and therefore consumer not only carries the risk of whatever investment they opt for, but also the risk of the decision itself.

    The growth of ‘non advised’ arms or ‘direct sales’ arms of providers both demonstrate that there is a desire to deal direct with a consumer and both risk (and speaking from 1st hand experience, result in) mis-disclosure and consumers thinking they are getting something they aren’t.

    Oh – I’ve forgotten Issue 3 – non advised = commission. Something the Regulator feels is detrimental to consumers and has therefore ‘banished’ other than in circumstances where an intermediary is selling to a consumer without advice being given.

  2. Thank the lord for the FCA , they can close the stable door now the horse has bolted !!!!

  3. When the Chancellor opened the floodgates with pension freedoms, is it any surprise that the public in general had little idea what they were doing?

    The needs of the Treasury and consumers are short term, get the cash, spend it and increase tax revenue, little thought as to the longer term implications of the decision. No amount of guidance notes or decision trees will change the mind of someone determined to get hold of their pension fund.

    Even this week a prospective client was prepared to transfer from a 51% funded scheme with large GMP liabilities, just to release 40k towards a 450k house purchase. With a Critical Yield of 18.4% and no other obvious retirement benefits other than the State Pension, I turned it down.

  4. Customers are free to make their own fully informed decisions –

    The FCA needs to accept this – less of the Nanny State!

  5. All the cases I have looked at- the customer is quite clear what they want and understands exactly what they are giving up- that doesn’t make them stupid they just want to do different things with their money- we keep forgetting it is their money- they saved it or earns it- our job is to stop them making stupid uninformed decisions and help them have genuine plans on how to deal with all their future needs- not refuse to deal with them.

  6. So in short “non-advice” seems to be the worry, and it seems the clients are acting on fully UN-informed information !

    There is, of course, a very simple solution

  7. Is there any evidence to support the need for a probe into the adequacy or otherwise of the quality of communications from non-advising firms regarding the nature and/or value of any guaranteed income benefits being given up? And, should such communications stray into the area of risk warnings, isn’t there a danger that they could be construed to be advice? Just what is the duty of care of a firm approached by a consumer wanting to do something specifically without taking advice? If a firm provides non-advised services and a consumer approaches it saying I want to cash in my pension fund then, logically, the firm’s only responsibility is to accede to the client’s stated wishes.

    Or is the beginning of the regulatory cosh being applied to non-advised services in the same way as seems to be happening with Execution Only? At this rate, consumers will no longer be free to do what they want with their own money because providers won’t facilitate any course of action without proof of advice which, in many if not most cases may well be contrary to what they actually want to do. The regulator’s stance seems to be moving towards direct conflict with what the government’s Pension Freedoms legislation are supposedly all about.

  8. However we may wish to moan about things there is a simple truth – financial advice is given by Government mandate. This mandate extends through their (Gvts) view on appropriate product use, appropriate asset allocation, price and even extends to retro pricing products deeming old contracts unfair with scant regard to the cost to the product provider. All financial advisers are now the whipping boys of Govt and any advice or planning that goes off piste, or costs a semi decimal more than another or already existing solution, is advice given in peril. The obvious need for Govt to soft comfort the market with consumer protection in the shape of the Ombudsman, see the industry governed by poorly qualified, virtually illiterate individuals, shoe horning their target requirement outcomes into poorly manifested and rebuilt, historical client recollection. The only way to be an adviser now is to run the numbers and risk the complaints – it has to be done commercially. The absence of a back stop also means that sensible business management should lead to fairly frequent closure of the business entity and discreet agency transfer of clients so as to drop advice responsibility. The latest concerns of the FCA – a client giving up certainty for risk – shouldn’t they have lobbied Parliament to prevent the pension freedoms? Equally is it never going to be enough to preface any client documentation with “now client, before you read any of this drivel, please sign to say that you appreciate that by doing this with your pension, means you give up the certainty (such as it is perceived to exist – BHS?) and place it at risk as your capital will be placed in stock markets which the regulator conveniently refuses not to influence and thus is nothing more than a dysfunctional casino’.

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