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TPR and FCA in conflict over ‘second line of defence’ risk warnings stance

Trustees are being advised to avoid giving “specific” risk warnings to members for fear of straying into advice, despite the FCA pushing insurers toward tailored communications.

In addition, The Pensions Regulator is only “encouraging” trustees to give risk warnings, while the FCA’s rules are mandatory.

Contract-based providers say the differing regulations are “stacking the game in favour of trusts”.

This week TPR issued guidance to pension fund trustees on how to communicate the pension freedoms to members.

The draft guide says: “You should be careful to avoid giving advice to members when providing generic risk warnings. If members ask further questions about their retirement options be prepared to direct them toward Pension Wise and/or an FCA-regulated financial adviser.

“To avoid the risk of giving advice, we recommend that you do not provide specific risk warnings based on a member’s individual circumstances.”

TPR’s approach is directly opposed to the FCA. The FCA’s ‘second line of defence’ rules, published last week, will force providers to tailor warnings to individuals based on what they plan to do with their pensions and how well they understand the consequent risks.

Aviva head of pensions policy John Lawson says: “The game is getting stacked in favour of trusts – they’re not paying a levy for Pension Wise and now they’ve got a voluntary regime of generic risk warnings.

“All members, whether they’re in a mastertrust or contract-based scheme, have the same quandry at retirement and hold the same risks – it should be a level playing field.”

FCA head of investment David Geale told Money Marketing: “One of our concerns is people will be given a big pack of papers that have every risk warning under the sun and it won’t be effective because it’s not tailored to the individual. It’s about making that warning appropriate and helpful to the individual rather than just throwing the kitchen sink at them.”

Old Mutual Wealth retirement planning expert Adrian Walker says: “Like trustees, pension providers will need to tread a fine line that ensures they meet the FCA’s requirements and give customers adequate protection without moving into regulated advice.”

A TPR spokesman says: “The approach we have set out aims to provide protection for pension scheme members and to help them to make an informed choice. It does this by, firstly, promoting the use of the new free guidance service, Pensions Wise, and then, secondly, by highlighting the generic risks to be considered when choosing one of the new flexible ways of accessing their pension pot.

“Our guidance is tailored to the duties and legal circumstances of pension scheme trustees and is designed to be easily and quickly adopted by pension schemes.

“We also recommend that pension scheme trustees ask members to sign a statement to confirm whether they have received the Pension Wise guidance or regulated advice, and to confirm that they have read the generic risk warnings. This will help members engage with their retirement choices.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 6th March 2015 at 4:13 pm

    I received a call the other dy rom the wife of some fellow in need of assistance sorting out how best to deploy the values of his three pension funds. Sure, I should be able to help with that I said, so we made an appointment and I duly sent off the relevant pre-meeting pack, including the now familiar (to us) pension funds deployment questionnaire, a summary of the format of the meeting and mention of a fee for my pre-sale work (of which you can well imagine there’ll be a considerable amount).

    Today the wife phones me and says they’ve been in touch with Phoenix who are going to amalgamate all three plans and set up a DrawDown arrangement for her husband so they won’t be needing my services after all.

    Go figure.

  2. Julian Stevens 6th March 2015 at 5:48 pm

    I meant to write “the other day from”.

  3. Julian.
    It is plain that Phoenix was giving advice, unless all three plans were theirs. It is not enough to tell a client that it is possible to do it and they are able to accept their verbal instructions to switch on an execution only basis. What mandatory risk warnings were given to your ex-client? However, the call should have been recorded so if I were you I would report Phoenix to the FCA for a possible breach.
    However, E mailing a load of work for them to do, as well as an estimate that could have been taken as a bill before your first meeting probably scared them off. It proves that what you assumed was a good working relationship was not as strong as you first thought. Since RDR it has been necessary to meet with and test, these relationships and if your client was still in Phoenix, unless there were MVRs or GARs attached, I am surprised that you had not already reviewed Phoenix’s suitability as their pension provider.
    If you want to sign up to the MAS register of regulated advisers that will be shown to everyone guided towards regulated advice by Pensionwise, you must agree to do the first appointment at your expense and give clients a good idea of the cost to advise on and implement arrangements going forward. One of the beauties is that under the new flexible arrangements the mandatory need for a 3 yearly review has gone, so clients that are worried about ongoing fees can chose not to pay for them, although you should probably use risk managed multi manager funds to keep you safe. If the clients risk attitude changes later on, you cannot take any blame!

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