Advising on accessing pension pots, is there gold at the end of the rainbow?
As readers of this blog will know, sweeping changes were made to the UK pensions industry in April 2015 which allowed retirees to access the full value of their pension fund without the need to purchase an annuity.
Most readers will also remember that this change (emanating from 11 Downing Street) appeared to come as a bit of a surprise to the FCA. Far be it for this blog to criticise our elected officials or the ever vigilant regulator, it certainly seemed as if there was discord between the Government (who wanted to free up consumers to make their own decisions) and the watchdog (keen to protect people from making the wrong choices).
Now, less than a year later, the FCA is launching a review to ensure that the changes don't lead to another mis-selling scandal. The FCA's business plan for 2016/2017 (published on Tuesday) sets out 'pensions' as one of their top priorities and we can probably expect a heavy degree of involvement from the FCA in this area in the near future.
The FCA's business plan notes that people using pension freedoms to access cash or take drawdown presents different risks to those involved in taking an annuity. They also note an increased risk of people being targeted by fraudsters.
The advisory market is caught between a rock and a hard place; the Government has opened up a whole raft of new options for consumers but the FCA seems eager to penalise advisors (and providers) who facilitate access to those options. It's not this blog's purpose for me to set out my personal views on whether freedom of choice should trump protection (but if you ever bump into me in EC3 I'd be happy to bore you with my thoughts). However, it is clear that the pension advice market will remain a difficult one. Advisors are faced with a difficult juggling act, trying to act in their customers' best interests on the one hand and trying to keep on the right side of the FCA on the other.
As ever, watch this blog for any updates.