1. Compliance Update Round 2 - 2014 Pension Reforms

2. Key Learning Outcomes / Agenda
Understanding the purpose of the Guidance Guarantee Understanding delivery of the Guidance Guarantee Assessing the impact of this service on your firm Awareness of regulatory changes as a result of pension reforms

3. Last Time
FCA stated;
‘We are working with the Government to develop the impartial ‘guidance guarantee’ which will be offered to individuals at retirement from April and will consult widely about the detail of the standards governing this in the Summer’

4. Treasury Consultation
Every individual will have the right to free and impartial guidance at retirement
FCA responsible for the standards delivered
Providers will have a duty to make individuals aware
Relaxation of tax rules to allow greater freedom and flexibility
This includes allowing annuities to decrease and pay lump sums

5. Entitlement to the Guarantee
Everyone with a DC pension scheme
Free access to impartial guidance which is easily accessible via;
Printed publications
Internet
Telephone
Face to face
It must ensure customers are able to make informed and confident decisions

6. Delivery Channel
For it to be trusted by consumers the services has to be offered by organisations which;
are Independent
have no conflict of interests
This is to ensure they have no vested interest in the outcome

7. Personal circumstances
Delivery of Guidance
Personal circumstances
Spouse/Partner
Dependents
State of Health
(life expectancy)
Potential LTC needs

8. Financial Circumstances
Delivery of Guidance
Financial Circumstances
Pension entitlement (all pension pots inc. spouse/partner)
Other income and benefits
Capital expectations
Tax status
State benefit entitlement
Home ownership
Debt position

9. Delivery of Guidance Discuss objectives; Retirement plans Income needs
Depletion of money in retirement

10. Discuss all options (to include);
Delivery of Guidance
Discuss all options (to include);
Taking income via a retirement product
Taking cash or a combination
Taking no action
It will include key facts and give consequences for each action;
Taxation
Sustainability
Needs of family/dependants

11. Consumers will be responsible for the decisions they make
The Guidance
The outcome will NOT
Confirm which option to use
Make a specific recommend on;
the product
the provider
which adviser to use
Consumers will be responsible for the decisions they make

12. NO ADVICE NO PRODUCT FACILITATION
MAS & PAS
NO ADVICE NO PRODUCT FACILITATION

13. Guidance Outcomes Individuals have to self select
Provision of information on how to shop around
Signposts to;
Debt advice services
Benefits advice
Full financial advice
Ensure the individual is armed with the right questions to ask

14. Seek Regulated Financial Advice
Client Record
Each individual will receive a record of the guidance output which will include;
Relevant options
Key facts
Consequences
Next steps
Directions for information / advice
Seek Regulated Financial Advice

15. Advice
Where specialist advice or information is needed the guidance will direct them to areas of support ie. directory of financial advisers

16. Funding Initially this was a Government funded service
Treasury consultation is placing this levy on regulated financial services firms
This will be targeted at firms that will benefit from these reforms
The total levy will be set by the Treasury but collected by FCA

17. Our Response
Simply Biz Challenges FCA on Advisers Share of Guidance Levy
Ken Davy, Chairman of the SimplyBiz Group, has responded to the FCA Consultative Paper CP14/11 and challenged the apportionment of the costs of the Guidance Guarantee being proposed for advisers. The Consultation Paper proposes two options; the first would make advisers liable for 30% of the Levy and the second 20%.   A third option acknowledges the inherent unfairness of the first two options and seeks guidance on how a fairer system might work. In an extract from the submission, Ken Davy says; “The benefit to advisers (from the Guidance Guarantee) is likely to be approximately £12.5m per year.  It is essential to note however that this is not a cumulative benefit.  For the other fee-blocks the benefit is c£39m a year on a cumulative basis. Therefore, within just 5 years the insurers and money managers will have received a total of approximately £549m compared to the advisers total of c£62m and be receiving an annual income 14 times greater than that of advisers.”   Commenting on the FCA Paper, Ken Davy added; "The gap highlighted above and its inequality will continue to worsen year by year on a cumulative basis to the increasing disadvantage of advisers. We have seen with the Investors Compensation Scheme Levy, which continues to place a wholly unfair burden on advisers, how the unintended consequences of regulatory action can damage the sector.  We are also very concerned that the Guidance Levy is handing a blank cheque to the organisations tasked to deliver the guidance.  We are not against the Guidance Service itself; however it is vital that the costs are shared equitably and properly controlled.  Our detailed response to the FCA demonstrates that the adviser fee-block proportion should more properly be of the order of 6% or less rather than the 20% or 30% suggested".
“We are not against the Guidance Service itself; however it is vital that the costs are shared equitably and properly controlled.  Our detailed response to the FCA demonstrates that the adviser fee-block proportion should more properly be of the order of 6% or less rather than the 20% or 30% suggested".

18. Our Views – Pensions Tech
Keeley Paddon – Head of Pensions Technical
“Whilst the debate on funding the guidance guarantee continues, we feel a number of positives will come from the changes. Whilst the Money Advice Service and The Pensions Advisory Service will be undertaking detailed fact-finding, neither party is permitted to choose or recommend an ultimate contract – only give guidance on the various options – nor will they be able to place business with the product providers. In our experience, providers will not deal with clients directly and still need to process any business via an advisory practice. This could lead to double fact-finding of course, but we expect to see an increase in both customer enquiries and those who are seeking full advice. With so many options to consider, we are quite sure that even more true advice (not guidance) will actually be required.”

19. Providers – New Rules Responsible for sending information to customers
This must include;
Size of pension pot
Details of MVRs, Guarantees or other features
Signposts to the guidance guarantee
Clear direction where this can be found and if required free face to face meeting

20. Providers – New Rules
Send out information 4 to 6 months and a further reminder 6 weeks before intended retirement date
Refer to Guidance regardless of the type of communication made. This must not discourage the service
Current requirement to inform customers of an open market option* continues and to open this up to other areas
Confirm tax implications on selected option
Must still send MAS retirement booklet
*FCA’s review of the annuity market will continue

21. Providers – The Rules The Regulator expects product innovation!
Illustrations – current requirement for drawdown;
project income & fund value at 5 yearly intervals
compare annuity now and in 10 years
Only change is removal of withdrawal limits
No change to pension projections ie. projection income via annuity
Review automatic annuity processes

22. Adviser Firms Application of all pension reforms
Awareness of new developments in the market
Suitability reports;
Income sustainability
Tax implications

23. Unknowns – The Advice How will this be delivered? Execution Only
Insistent Client
Simplified Advice
Limited / Focused Advice
Full Advice

24. Any Questions?