FCA publishes pension guidance standards
In late November 2014, the Financial Conduct Authority (FCA) announced the standards which Citizens Advice (CitA) and The Pensions Advisory Service (TPAS) will need to follow from April 2015 when delivering the Government’s free pension guidance. This Guidance Service will be launched at the same time as pensioners become able to access their entire defined contribution pension funds as cash, with the first 25% of each withdrawal tax free and the remainder taxed at their marginal income tax rate.
CitA (which will deliver face to face guidance) and TPAS (which will deliver telephone guidance) will not themselves be regulated by the FCA, but it will be the FCA’s responsibility to supervise the guidance given by these bodies.
The way the FCA supervises CitA and TPAS will be similar to its existing supervision of regulated firms, in that tools such as data analysis, sales monitoring and mystery shopping may be used. The regulator can recommend steps the providers should take to ensure compliance and to rectify breaches, but will not have any formal enforcement powers, and will need to make the Treasury aware of any serious issues it identifies.
The new standards will include:
- The service offered must be consistent across all delivery channels, i.e. whether the guidance is sought via telephone, online or face-to-face, the level of guidance customers receive should be the same
- After being asked to provide information on their financial circumstances, customers can be made aware of applicable options for taking retirement income, and their advantages and disadvantages; and can be signposted to a directory of financial advisers and/or product providers where appropriate. However, CitA and TPAS staff will not be able to recommend specific advisers or providers, or recommend specific options for taking retirement income
- A record of the guidance session must be provided to the customer in a durable medium
- Staff delivering the guidance will not need to hold any professional qualifications, but will need to have ‘the necessary skills, knowledge and expertise’.
- The organisations must exercise ‘due skill, care and diligence’ in delivering the guidance
- The organisations must communicate with customers in a way that is ‘clear, fair and not misleading’
- The organisations must have sufficiently rigorous systems & controls to ensure that they comply with the standards
- The organisations will need to have documented complaints procedures which specifically relate to the Guidance Service, and will need to signpost customers to the availability of these procedures. They will also need to maintain sufficient records of complaints received and how they were handled. However, the FCA will not lay down detailed rules as to how CitA and TPAS should handle complaints.
It can be seen that many of the above are similar to FCA principles and key rules for regulated firms.
Pension providers will be required to recommend that customers use the Guidance Service before they take benefits from their plan.
Christopher Woolard, director of policy, risk and research at the FCA said:
“Any decision about your pension has far-reaching consequences that often cannot be reversed. The pensions’ landscape will fundamentally change from April 2015 so it is important that people get support to enable them to make the right choices about what to do with their retirement fund.
“We want this to work well for consumers and industry and I believe that the standards and rules we have published today strike that balance. They will give consumers confidence in the quality of the service they will receive and provide certainty to those tasked with delivering it from April next year.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article