We are urging advisory firms to assess their retirement income advice, in advance of the publication of an FCA review later this year.

Director, Vicky Pearce, said: “Advisers have been so focused on Consumer Duty, they may have missed this thematic review, which will be the first real flex of the regulator’s new enforcement powers.”

The FCA announced its intention to scrutinise the retirement income market in January this year. 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 quarter four.

Vicky added: “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 going forward.”

The FCA’s most recent retirement plan data shows 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number of pension holders accessing regulated advice for the first time and a rise in the overall value of money being withdrawn from pension savings.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 savings before they die.

Once the FCA’s findings are published, we will be disseminating them to clients and rolling out tailored support to address any particular issues raised. This will include reviews of the pension income advice process and file checks, to look at the suitability of advice and whether consumers are being made aware of potential risks.

Vicky concluded: “The outcome of the thematic review will likely mean additional work for most firms (although any new regulation will be a way down the line), as the FCA will expect them to make any relevant changes. However, if a detailed benchmarking exercise was carried out as part of the Consumer Duty implementation process, the level of effort required could be minimised.”

For more information about our file reviews and Consumer Duty support services, don’t hesitate to contact us on (0161) 521 8641.

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