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Speculation of drawdown review as FSA probes into IFA business

The FSA is requiring income-drawdown providers to identify the 20 IFAs they do most business with, heightening fears it is planning a full review of sales.

A similar demand b y the regulator in 1998 raised fears among IFAs and providers of a review although this did not happen.

The concerns have surfaced after recent reports showed that average premiums into drawdown plans are falling.

This has led to fears that drawdown plans are being sold inappropriately.

IFAs believe the information gathering exercise could set the scene for FSA visits on drawdown advisers and a possible review of their sales.

Some industry experts believe the regulator is concerned that IFAs may be swayed by potentially high levels of up-front commission to recommend drawdown products.

Annuity Direct director Stuart Bayliss says: “The FSA is definitely bring-ing this into closer scrutiny and it will get even closer.

“The FSA now has more information on this product than any other and sees it as a high-risk product.

“Some advisers are selling for commission but others are trying hard to offer the right investment advice. Any review should look at the bigger picture.”

Carrington Consultants head of retirement team William Sallitt says: “I am happy if the FSA wants to visit. Here, recommending pension fund withdrawal over an annuity has to get through a number of hurdles before the advice is given. But for some drawdown advisers who take significant up-front commission of between 5 and 6 per cent, as opposed to trail commission, the regulator might be concerned.”

FSA spokeswoman Jackie Blyth responds: “We are gathering this information as part of the regulatory update and asked for the same information in 1998.”

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