Another thumping read (all 276 pages of consultation paper 170) from the FSA will have arrived on the desks of most compliance directors across the country by now. As Money Marketing reported in its February 13 edition, the proposals look set to cost the industry £110m but I suspect I am not alone in believing the actual costs will be much, much more and at a time when the industry can ill afford it.
The key facts example used in CP170 shows a very straightforward pension contract. In reality, most pension providers will need to add sections to reflect the heightened complexity of pension products nowadays.
For example, many private pension scheme holders no longer rely on their provider's managed funds, which have been derided for their poor performance in recent years. Some have chosen external fund links and hold more diverse classes of investments.
Others, closer to retirement age, will want to look at their projected values if they want to take the option of a percentage income drawdown option on their pension rather than use the whole fund to buy an annuity, for example. Ideally, these people will need two or three projections based on their own targeting requirements.
This sort of information can and will be needed by many people holding pensions from both a new business and existing business perspective. Providers will have to factor this into the programme management process as they bring together the various elements of their own and external organisations to deliver.
One estimate has it that implementation cost estimates from the FSA traditionally need to be tripled to get the true cost of putting the changes into effect across the industry.
Without adoption of the very latest technology to help gather appropriate information and the manage building of these key facts documents, an estimate of £330m is likely to be closer to the truth than those drafting these changes dare to admit.