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FSA faces fight to alter Cobs for drawdown

Suffolk Life says the FSA may struggle to amend its conduct of business sourcebook in time for the introduction of the new pension drawdown regime in April 2011.

Last week, the Government confirmed details of proposals which will end compulsory annuitisation at age 75. The plans include the introduction of capped and flexible drawdown, subject to a minimum income requirement of £20,000 a year. The FSA will need to change its rules for the revised regime.

The reforms have been generally welcomed by the industry as pragmatic and sensible but concerns have been raised over whether the FSA can draft, consult on and implement the rules in the timeframe.

Suffolk Life marketing director John Moret, who previously urged the Government to delay the reforms until 2012, says: “The Government has largely stuck to its guns but it is interesting it has committed the FSA to amending its Cobs rules by April, which I think is quite a stretch to form draft rules, consult on them, implement them and give providers time to adapt. Three and a half months is pushing it.”

Aegon has indicated it is unlikely to have a flexible drawdown product in place by April 2011. Senior pensions development manager Kate Smith says: “There are still bits of the jigsaw missing, particularly from the FSA who are consulting on their Cobs rules. There is a hell of a lot to do before April.”

An FSA spokesman says it will be forced to undertake an “accelerated version” of its standard consultation procedure, with a consultation detailing amendments scheduled for the beginning of 2011. He says: “We will be consulting on new Cobs rules in January and we will publish a policy statement before the April deadline.”

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