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Mortality drag is key issue as FSA visits drawdown IFAs

The FSA is making a series of visits to specialist income-drawdown IFAs.

The news follows the regulator asking major drawdown life offices, including Winterthur Life, to supply it with details of their top 20 supporting IFAs, as revealed in Money Marketing last September.

This has fuelled speculation that the FSA plans to review drawdown sales amid misselling fears of the plans which can pay up to 6 per cent commission up front.

Now MM understands the FSA is more concerned with devising best practice models and potentially requiring any IFAs offering drawdown advice to pass special exams. It is understood to be particularly concerned with how advisers explain mortality drag to clients.

Income Drawdown Advisory Bureau director Ronnie Lymburn says: “This is not a witch-hunt although there is an underlying concern there could be misselling somewhere down the line. We believe drawdown should be a permitted activity but how this will limit the availability of advice is open to debate.”

Winterthur Life Mike Morrison says: “If what results is a higher level of knowledge among advisers, I am all for it but the problem is if you make drawdown a permitted activity, you have to make annuity purchase under the same banner.”

FSA spokeswoman Jackie Blyth says: “We will be visiting IFAs as part of our regulatory update. Whether or not income drawdown becomes a permitted activity will be looked at as part of the current review of examinations.”

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