The FCA has set out its proposed standards for what the Government’s guidance guidance will look like.
In its consultation paper, published today, the FCA says insurers will be required to inform savers approaching retirement that they are entitled to free and impartial guidance, and will have to provide consumers with key information about their pension pot, such as the size of their pension pot, details of any market value reduction, guarantees or any other relevant special features.
Trust-based schemes will be required to provide details of any other benefits held by the member, for example the defined benefit where the defined contribution pot is an additional voluntary contribution.
Savers themselves will be asked for extra information including income, capital, tax status state benefits and any debts and whether they own their home or rent.
When a saver attends a guidance session they will be told the “scope, purpose and limitation” of the service. They will be asked for information on their savings and other financial and personal circumstances and what it is they are trying to achieve.
The discussion about relevant options should include taking an income through an annuity or drawdown product including any new products which emerge, taking cash, a combination of both and taking no action at that time.
Recommendation of specific products, providers or financial advisers will not be allowed during the guidance process, but more information on where to find an adviser will be given. This could be done through an adviser directory, the FCA says.
The guidance sessions will be available face-to-face, or as a telephone-based or web-based service. Savers will be entitled to as many guidance sessions as they want in retirement.
The FCA says: “The guidance will be relevant for and targeted at consumers with defined contribution pension funds who are actively considering their options for accessing their pension savings. There will be no limit to the number of times an individual can use the guidance service as their plans develop in retirement.”
“Based on the personal and financial information the consumer has provided, we would also expect other issues to be set out for the consumer to consider. For example, the needs of the family if the consumer has a spouse or dependents.
“We would also expect consumers to be alerted to areas they may not have considered. For example, longevity and the danger of running out of money during retirement, the possible impact of state benefits and possible long term care needs.”