Come next April, the world of pensions will be irrevocably changed, and with it the advice given will have to be adapted accordingly. Chancellor George Osborne has laid out his grand plan for pension flexibility, but, as Money Marketing reveals this week, some of the regulatory implications are yet to be ironed out.
The Government has now set out its position on the guidance guarantee, and the FCA has outlined how it plans to deliver the service. But behind closed doors, the FCA is having a separate conversation on the nuances and practicalities of the Budget pension reforms.
The question at hand is: Should the FCA relax the current pension transfer qualifications requirements in the wake of the Budget?
Money Marketing understands the FCA is examining the issue after it was raised as a concern by the industry.
The problem the regulator has been asked to solve is as follows: the FCA considers that transfers from workplace defined contribution schemes to go into drawdown require advisers to hold the regulatory permissions to advise on pension transfers and opt-outs.
It has been questioned whether this requirement is needed in the current environment for DC to drawdown transfers, let alone when we move into the brave new pensions world.
The FCA has a delicate balance to strike. On the one hand, requiring advisers to take the necessary exams to get these permissions should go some way to ensuring a high quality of advice in what may be a growth area following the Budget.
Does the regulator really want to be moving to a place where advice related to the complex area of pension transfers is not being carried out by qualified individuals?
On the other hand, concerns have been raised that by making the hurdle to give advice on transfer from occupational DC to drawdown so high, consumers risk being priced out.
Clearly, pension transfers advice is a notoriously technical area to navigate and this comes at a cost. By requiring such a high bar on the qualifications front, the regulator could find that the very people who need advice are not able to afford it.
This is likely to jar against the backdrop of the RDR.
This year’s Budget was hailed, in these pages no less, as the Budget for financial planners. The question the FCA is yet to answer is: for how many?
Natalie Holt is editor of Money Marketing