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.”