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FCA: Providers failing on retirement risk warnings

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Providers are failing to provide effective risk warnings to savers looking to access their pensions, the FCA says.

In its October report into pensions guidance and advice, the Work and Pensions committee advised the FCA to strengthen rules around signposting and risk warnings.

And now the regulator has admitted concerns with the quality of risk warnings being provided by some firms.

In its response to the committee report, the FCA says: “For example, we believe that some firms are not personalising warnings sufficiently, and therefore consumers are unable to understand how the risks apply to them.

“Firms adopting better practices are using follow-up questions in calls to ensure that customer fully understand the warnings.

“We have provided feedback to firms, where necessary, asking them to address our concerns, and we will continue to monitor this.”

It is not the first time providers have faced criticism for their response to the pension freedoms.

In an interview with Money Marketing in November, pensions minister Baroness Ros Altmann blamed providers for low take-up of Government-backed guidance service Pension Wise.

She said: “I’m concerned the providers are driving too many people to their own in-house services.”

Risk warnings have been a point of contention for the regulator, which revealed its expectations for providers in late February 2015, weeks before the pensions freedoms came into effect.

The FCA clashed with The Pensions Regulator months later after TPR told trustees to provide generic, rather than tailored, warnings to consumers.

In October, the FCA announced that the second line of defence rules would not apply to pension pots below £10,000, although TPR chief executive Lesley Titcomb later described the plan as “problematic”.

The FCA has also responded to suggestions from the MPs that providers were hesitant to innovate in advice or pensions offerings because of a lack of regulatory clarity.

The FCA says: “Now that providers have had time to see the freedoms bed in, we are starting to see new products emerge and examples of automated advice models are starting to come on stream.

“We are supporting providers with this process, through supervisions, Project Innovate, which particularly supports new advice platforms, and the Financial Advice Market Review, which we jointly chair with HM Treasury.”


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

  1. Providers to FCA: You seem constantly to fail on just about EVERYTHING, hence you’ve currently not got a permanent Chief Exec and the Treasury has had to intervene and knock a few of your heads together by way of the FAMR.

    Let he who is without sin cast the first stone. No chance of that. Hypocrisy is very much alive and well at Canary Wharf.

  2. Here we go!! Let’s get the groundwork done to prepare for the fine income stream we want to create.

    Why stop there? How about deposit accounts?


    What a load of BS.

    Ian Coley
    Medical Investment & Advisory Services LLP

  3. Now then, we’ve taken this horse to the water. Let’s make it drink.

  4. The FCA still struggling to realise that risk warnings are completely ineffective at dissuading people from making stupid decisions.

    It’s not about the quality or the format of the risk warnings. Once people have their mind set on a particular course of action, it takes a strong personality with knowledge and conviction to talk them round. Advisers will tell you that they often need to get sat in front of the client to really get the relevant points rammed home. With the best will in the world, provider front-line staff are not going to be able to deliver this.

    The issue is not even with the regulation; it is with the government’s conviction that the UK consumer is financially savvy and will make prudent decisions. If that is the case, risk warnings are a complete red herring anyway.

    The FCA figures show that people are simply not engaging, rather than the problems being with what happens when they do engage.

  5. Is there anything that the FCA has done well, apart from screw up the availability of advice?

    Instead of admitting (for once) that they messed up, they now consider letting the banks back in by lighter regulation, whilst maintaining micro-management of the IFA sector.

    We all know what’s going to happen here.

    Protecting their future job prospects when Osborne fires them?

  6. If you cash in your pension plan, you will have that source of income in retirement.

    How hard was that.

    Problem is most customers have one question, “when will my cheque come”. Also important not to forget that most provider staff are not qualified to give advice.

    Source of the problem is Osborne wanted all that money pumped into the economy, much of it less Emergency Tax.

  7. I mean you will NOT have that source of income in retirement.


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