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Regulator’s income muddle Letter to the FSA

If I were a member of your monitoring department and I found an IFA peddling a description of income withdrawal as below, I would take action against that firm for misleading investors.

However this is taken from your own website.

Please remove it or change it and provide us with an explanation of why you are misleading potential investors. The first sentence is wrong on two counts. This is the text:

Income withdrawal

“A contract with an insurance company where you take an income direct from your pension fund, while leaving most of it invested in the stock market or other asset-backed investments. Usually, the hope is that the returns on your invested fund will make up for all or most of the charges and any income withdrawn, and be enough to sustain your income. However, the fund value could fall as well as rise and any any income you take plus the charges, will reduce the value of your fund if they are more than the investment growth.

I found the above quite astonishing. The FSA clearly do not understand what income withdrawal is.1: It is not a contract, it is an arrangement.2: Why should it be with an insurance company?3: What has the investment got to do with it? You might just as easily leave the money in cash.

If the FSA are on a mission to nationalise financial advice in their own image then at least they could get the definitions right.

These errors are repeated at the FSA monitoring department. Recently, a circular stated that smaller drawdown cases were higher risk because small meant higher risk and higher cost, which hardly follows.

These errors are also repeated at the FOS where adjudicators are making similar statements, showing their lack of understanding of relatively simple products.

Charles Llewellen Palmer

Financial Ltd

Cheltenham

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