Financial Planning firms need to assess their retirement income advice in advance of the FCA’s impending review of the retirement income market, a compliance firm has warned.
The FCA has already begun its review of the retirement income market, both during and after the implementation of its new Consumer Duty.
Compliance firm B-Compliant warns that the FCA will expect Financial Planners to show how services, including pension income advice, reduce the risk of harm and enable clients to make effective decisions.
Vicky Pearce, director at B-Compliant said the review will be the “first real flex” of the regulator’s new enforcement powers.
She said: “As this review has taken place during and after the implementation of Consumer Duty, we expect it to be key in assessing how firms have adopted the regulations.
"It is important to note that the rules are not backwards looking, but advisers will be expected to show how ongoing services, which include pension income advice, reduce the risk of harm and enable clients to make effective decisions. This, in turn, will have an impact on the regulatory framework.”
The FCA said in January that it was keen to look at how the 2015 Pension Freedoms have impacted on the quality of advice clients receive, particularly at the first point of accessing their savings. Its findings are due to be published before the end of Q4.
The FCA’s most recent retirement plan data showed a year-on-year increase in the number of pension holders accessing regulated advice for the first time, and a rise in the overall value of money being withdrawn from pension savings.
However, 40% of regular withdrawals were at an annual rate of more than 8% of the pot value, suggesting a potential risk that consumers will exhaust their pension savings.
B-Compliant added that although any new regulation as a result of the review will be down the line, it will create additional work for firms which could be minimised by a benchmarking exercise.