FCA proposes changes to pension rules to enhance consumer protection - PwC insurance comments

Published at 16:15 PM on 01 October 2015

Following today's consultation paper by the Financial Conduct Authority (FCA)  outlining proposed changes to its pension rules to address the risks and challenges faced by consumers in the new retirement market, Steve Folkard, director in PwC's insurance practice commented:

"It is clear from today's FCA consultation paper that its market review has given it good visibility of some risks that are rapidly developing as a result of both consumer and firm responses to the pensions freedoms.

Having highlighted the growth in non-advised sales and "excessive charges" in legacy schemes as two of the main risks they will be seeking to address, it is telling that whilst this paper focuses on the retirement market, the latter comment may have more significance for the announcement of the outcome of the heritage review expected shortly.

With regards to the further attention on retirement product sales non-advised space, we would expect to see a focus on whether consumers are making poor decisions in the 'rush for cash' identified by much of the market. With significantly lower numbers purchasing guaranteed income through annuities, and taking decisions to use drawdown to release cash, even when not taking an income, the need for assistance in creating sustainable investment portfolios. which will maintain the value of funds in real terms, is now more crucial than ever before. Lower cost advisory services and innovative digital models can meet this need and prevent the possibility that many customers may be buying solutions without fully appreciating the need for sustainable investment solutions, which for many will need to support future incomes for periods of 25 years or more."

Steve Folkard is available for comment. Please contact Ellie Raven on [email protected] or +44 (0) 207 804 3663.


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