The rules, which come into effect on 6 April have been issued without consultation because, the FCA said, the delay caused by consultation would “increase the risk of poor outcomes for large numbers of consumers” that decide to access their pensions in the months immediately after the introduction of the new flexibilities.
According to the FCA: “The new rules will require firms to give appropriate retirement risk warnings to consumers accessing their pension savings. Firms must ask the consumer relevant questions, based on how the consumer wants to access their pension savings, to determine whether risk factors are present. If they are, risk warnings must be given.”
While it says it will not proscribe the nature of the risk warnings, they must relate to how the consumer has decided to access their pension savings and will flag specific risks to consumers.
“We think that these retirement risk warnings can be given without providing regulated advice; we are not requiring firms to tell consumers what to do or implying that the consumer’s decision will be wrong. We are simply requiring firms to ensure the consumer is aware of the risks of the course of action they are seeking to take,” the FCA said.
These rules are designed to sit alongside the near final rules already issued by the FCA that helped to establish the PensionWise facility to provide consumers with free, (at the point of delivery) impartial guidance.
According to the FCA, the rules are intended to deliver three outcomes:
- Consumers understand the importance and implications of the decision they are making about accessing their pension savings.
- Consumers are further prompted to seek regulated advice or guidance from Pension Wise to help them understand the risks they face.
- Firms understand our expectations about the minimum they should do to warn consumers about the relevant risks when choosing what to do with their pension savings.
As a result, the FCA said, the rules require firms to give appropriate retirement risk warnings to consumers who have decided to access their pensions savings on an execution–only basis.
“The trigger for firms to follow the steps in the retirement risk warning rules is the consumer saying (verbally or in writing) that they want to access their savings, regardless of whether the consumer makes contact with the firm or the firm contacts the consumer (even if the purpose of the contact was initially for some other purpose, such as a promotion).
