Royal London is calling on the Government to roll-back regulation on ‘micro pots’ so consumers can access their money easier.
For pots of less than around £1,300, Royal London is worried that FCA rules requiring referrals to Pension Wise, risk warnings and open market option statements could be putting people off taking their money entirely.
Royal London director of policy Steve Webb says: “The issue that we are concerned about is that under current regulations we still have to go through a lengthy and costly ‘at retirement’ process with these customers even if they simply want to access their cash as a lump sum.”
“Our customer services team report that virtually all of those who contact us with a micro pot are looking for a cash lump sum. However, we are bound by legislation…which decrees that we must issue information on an individual’s open market option before issuing them an application form and requires us to provide retirement risk warnings at the point that an individual makes a decision.
“We believe that there is no value in sending a customer with a micro pot an open market option statement, as defined by COBS 19.4 – they simply don’t have an open market option, as no provider will accept such a small purchase price. To issue an OMO statement to a customer with a micro pot is confusing and frustrating for the end consumer who may well think that we are simply trying to put barriers in their way.”
Webb also told Money Marketing that launching a new guaranteed drawdown product was now being taken “quite seriously” by the firm.
The former pensions minister said the firm could look to target an older age profile, for example the over 75s, who may find guaranteed income more suitable than those around retirement age.