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Kim North: Adviser input critical for FCA freedoms consultation

Kim North

“All I want for Christmas is my two front teeth.” So goes the famous song that has been parodied many times over the years. But let me explain one thing I would like from Santa this year.

As most of you will know we have one of the most important FCA consultation periods on pension freedoms coming to an end on 4 January. I would like thousands of responses from advisers, providers and support services alike so the outcomes are in the best interest of consumers and are achievable by the industry.

I have been in meeting after meeting with banks, life companies, investment groups and reinsurers discussing what changes are needed to make pension freedoms effective for the millions of people not willing to pay an adviser charge.

Many of the large companies have not done much at all, apart from inluding small mentions of pension freedoms on their websites. But who can blame them? Many of the associated issues, such as client communications, transfers, product design and illustrations, are in the FCA paper under consultation.

However, according to the FCA, over 120,000 people have withdrawn all or part of their pension funds as cash. When asked by Royal London why, the response from consumers was so they “can see their money”. We need to address the fact that the value of funds and products needs to be more visible as people become more visual.

People want to see not read. Just ask Facebook founder Mark Zuckerberg how successful his purchase of Instagram has been to prove the point.

Seven wise men – or actuaries – need to visit the regulator and take gifts explaining the seven main implications of the consultation.

CTC actuary Nigel Chambers, for example, believes the problem of insistent clients is exacerbated by the FCA’s own starting point that any transfer from a defined benefit scheme should be deemed unsuitable. This inevitably means the formal advice provided will be skewed to reflect this assumption. The existence of such a starting point itself creates more insistent clients, which will mean the Government’s aspirations that more people should utilise pension freedoms will be thwarted.

Technology and Technical actuary Blake Dempster, meanwhile, says: “The core of the DB to defined contribution transfer issue is matching a comparison to the amount of pension the individual would forego under the DB scheme, including comparable spouse’s benefits and pension increases the individual could buy in the new pension freedoms world”.

Many actuaries would also like to see more attention paid to longevity issues to ensure correct protection and income for life. I could continue in my mission to gift to you the best ideas I have heard recently but I may keep you from your Christmas dinner.

So, what I really want for Christmas is for Money Marketing readers to respond to the paper in the next two weeks and then enjoy the holidays. Happy holidays all.

Kim North is managing director at Technology and Technical 


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There is one comment at the moment, we would love to hear your opinion too.

  1. My guess (I may be wrong, of course) is that the number of people wishing to encash CETV’s (of defined benefit pension entitlements) or transfer them to something like an Income DrawDown arrangement isn’t very great (even though some of the CETV’s may be very substantial).

    The big issue for most advisers is people wanting to encash money purchase funds or PP’s, because the FOS commonly disregards signed disclaimers of liability on the adviser and the FCA refuses to direct it to accept them as valid. The FCA (as usual predicting the worst motives on the part of advisers), anticipates disclaimers being used merely to bypass the provision of advice. Not so. But the FCA won’t listen.

    Therefore, most advisers insist that their advice must be all or none, that the client shall be required to pay for it and that if the conclusion is not to encash, that’s the end of the game.

    “Won’t you facilitate what I want to do anyway?”

    “No I will not and here’s why. Take it up with the FCA and the FOS.”

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