MSE News: 'Second line of defence' for pension savers to be introduced

gadgetmind

zagfles wrote: »

Presumably it won't be compulsory to answer these questions?

Answer their questions with questions. That always throws a big duvet of confusion, doubt and uncertainly over anything, always good for a laugh if you're not in a rush.

Pincher

Dear Pro Life,


I, ___ Isambard Mobius Pincher _____, hereby declare that I would like to withdraw the full balance of my Pension Policy ______ ABC456789 __________.


I affirm that I have notified Pro Life that I intend to spend the proceeds on


__ A prolonged orgy of obscene debauchery in the flesh pots of the world. ____________


I further affirm that Pro Life has issued strong objections to my plans, and has made every attempt to dissuade me from such undertakings.


I also acknowledge that Pro Life has advised me that I am solely liable for filing all taxes due, which can be as high as 55%.


I hereby confirm that Pro Life has fulfilled all regulatory obligations under FCA directive KNEEJERKTOLIBERATIONFRAUD, and wish to proceed with my pension withdrawal to completion.






Signed_____________________ 7th April 2015








Next directive will of course say a waiver form is not enough,
and you have to record the session by webcam, and the adviser has to rendition the client, and make them confirm under torture that they really want to take the money out.

bmm78

The cynic in me thinks that this is more a collective backside-covering exercise on behalf of the government, regulator, and indeed the providers - the ABI were themselves calling for the SLOD (as hopefully no-one starts calling it), which surprised many people.

It all seems to come down to an acknowledgement that some people will not make best use of their new found freedom, alongside the desire of the key players to not be the scapegoat if and when that happens.

It's important to note that the rules will be transitional, with further to follow later in the year. There is huge pressure on the FCA from consumer groups, and I am concerned that overbearing regulation could affect the ability of people to make "complex" decisions without advice. While advice will be vital to many people, those who are willing to take responsibility for their own decisions should be allowed to do so and not forced to pay for a service they don't want or need.

jamesd

I think some covering of risk but notice that the FCA made a point of mentioning that some decisions were irrevocable and that it has incorporated the ABI guidelines into its rules? That reads to me like a clear warning to annuity vendors to up their tied inertia sales game or else.

In a wonderful move the FCA might even require mentioning state pension deferral as a better choice than annuity purchase for most who are in normal good health and looking to spend a few tens of thousands to increase income a the cost of capital.

Annisele

I think it's possible that some version of Pincher's waiver form could become very popular with fraudsters.

Let's say I have a fantastic opportunity for you in Cape Verde or Saint Vincent. It's a property (or a non-regulated "investment" of some other kind), with minimal risk, returns uncorrelated with the stock market, pays an income much higher than you'd get from an annuity, etc. You should invest your entire pension fund in my opportunity, and there's no need to worry about tax consequences of withdrawing your whole fund at once because the returns will be vastly in excess of the tax you pay. All you need to do is sign this waiver form that I've already drafted for you and then fill in an application form.

If I were to advertise my wonderful opportunity on MSE, it'd be spam-buttoned into oblivion within minutes. However, I might be more successful if I advertised my opportunity elsewhere.

So, provider gets a dozen waiver forms all the same, complete with the same mis-spellings, and the provider thinks (but doesn't know for certain) that my fantastic opportunity is simply a scam. Provider has a duty to act in the best interests of its clients. Provider should...?

Pincher

Annisele wrote: »

I think it's possible that some version of Pincher's waiver form could become very popular with fraudsters.

Pro Life will insist that the pensioner signs it already. No need for anybody else to invent it.

atush

nearlyrich wrote: »

I have been saving for my pension since I was 28 with a plan to retire from work at 55 I have a reasonable amount of money in the plan plus about the same in ISAs (stocks and shares) I actually have a plan about how to spend it and I think I know better than my pension provider what I want from it. I understand tax implications and I reckon I can get away with not paying any or very little by managing the funds in the same way I built them up very carefully. I will take the 25% tax free lump sum and that will keep me going for a while...

But you are probably in the minority in both your planning and knowledge.

given the daily posts we get here, surely you know the gen pub knowledge isnt as high?

bmm78

jamesd wrote: »

I think some covering of risk but notice that the FCA made a point of mentioning that some decisions were irrevocable and that it has incorporated the ABI guidelines into its rules? That reads to me like a clear warning to annuity vendors to up their tied inertia sales game or else.

I think they are two separate things (or at least were at one point). The writing has been on the wall for the internal annuity game, and the FCA review was always going to lead to much stricter regulation (irrespective of the pension reforms).

In terms of the Second Line of Defence though, as recently as 18th December (after the thematic review into annuity sales practices, and also after the ABI had called for the 2nd Line), the FCA when giving evidence to the Work and Pensions Committee were still suggesting that the guidance guarantee on its own was sufficient protection for comsumers:

FCA -"In terms of the second line of defence, we have put in a requirement that providers must ask somebody phoning up whether they have taken the guidance guarantee. If the answer to that is “no”, “Have you taken advice?”. If the answer to that is “no”, they must remind people that that service is available and what it does for them

W&P Committee -"That is nowhere close to good enough. That does not even approach answering the problem. That is completely and utterly useless. If someone has not taken guidance originally, someone asking them if they want to take guidance will get exactly the same answer as before. If you ask a question in that way, you will get the answer that they have given before. Ask any psychologist, salesman, anybody. That is exactly the sort of question that gets a “no”. You cannot do it that way. I am sorry; if you do it that way, you will get a very low take‑up and you will get no one being asked these questions at the time when they take the product up and sign the contract."

FCA - "That is what we have put in place. There is also a requirement on providers to do nothing to detract from the guidance guarantee service and effectively to make sure that people are aware it is available."

W&P Committee -"I am very worried that you are trying to put away your responsibility to talk about what a provider should do for its customers and say, “That’s Treasury”. I am sorry; you are the FCA. You are the Financial Conduct Authority. How providers act towards their customers is at the centre of your responsibilities...It does not have to be advice. It can just be, “We need to know if you have seriously thought about this. Have you thought about this? Have you thought about that?”...but that needs to be there before that contract is signed. If it is not there, you are going to get a mis‑selling issue and, in five years’ time, we are going to be bringing you back to say, “We warned you this would happen, but you didn’t do anything about it”. I am sorry; you will not enjoy it. You will not enjoy it.

The FCA are trying to spin it as being part of the plan all along, but they have clearly been rattled by having fingers being pointed in their direction.

There has to be a significant concern that the FCA, wary of being held responsible for ineffective regulation on a huge scale, will introduce over-zealous rules that will restrict people's freedom.

dunstonh

Its not much better on the adviser side. Compliance guidance on what regulated advisers should do is sparse. The Govt saying "have all these freedoms" and the regulator still seems to be set with the "high risk transaction" mindset.

So, at the moment, the compliance guidance is to continue to treat draw-down as a high risk transaction and only do it for those who can afford to do it. In cases of low-value full fund withdrawal, one compliance individual said that we should avoid transactional (one-off) cases of full fund withdrawal if you can as these have the potential to come back and bite you on the bum later when claims companies can no longer generate PPI complaints they will go looking for people that have spent all their pension money.

CMC advert of the future: "Have you spent all your pension money? If so, then you can claim against xxxxxxx"

the FCA is there not just to look at historic problems (which is how the FSA was) but also look at potential future ones. I suspect that this is where they have concerns as it is certainly what the compliance companies are talking about and they get their steer from the regulator contacts they have.

jamesd

Thanks. I agree that there's more than one thing going on.

If you were writing guidance to the FOS and annuity sales firms about rules that made annuity sales mis-sales by default, what rule would you use?

I'm asking because I think that such rules may be what it actually takes to stop poor value annuity sales that are beaten by deferring the state pension. With redress set at what it takes to deliver 10.4% increasing with inflation or 5.8% increasing with inflation to the customer for life.