ilp Second line of defence rules revealed
The Financial Conduct Authority (FCA) has published the so-called ‘second line of defence’ rules pension firms must follow to try to protect consumers wanting to access their pension savings under the new freedoms being introduced in April, writes Tim Leonard.
The new rules require firms involved in the sale of retirement income products to give tailored warnings to customers who want to access their funds on an execution-only basis. While firms are already required to provide risk warnings, the changes will require them to personalise the warnings to the individual and the choice they are making by asking a series of questions and actively engaging with the customer when they make contact to take their pension savings.
The questions should help the firm identify if a risk factor is present, and therefore if a risk warning should be given. Among the risk factors the regulator says firms should consider are: the consumer’s state of health; loss of guarantees; whether the consumer has a partner or dependants; inflation; whether the consumer has shopped around; sustainability of income in retirement; tax implications; charges (if a consumer intends to invest their pension savings); impact on means-tested benefits; debt; and investment scams. Firms will have to keep records to show
Just Retirement reveals pension freedom plans
Just Retirement is to launch a new set of products, services and tools to help intermediaries create retirement solutions for their clients, writes Tim Leonard.
Among the new offerings will be a platform to host low cost investment and cash fund options, allowing clients to draw down directly from their pension funds, and a UFPLS capability to enable client funds to be retained uncrystallised.
“Modern guaranteed income for life solutions” will offer added flexibility, including extended guarantee periods and the option for lump-sum withdrawal,
INDICATORS Bank of England Bank Base Rate on last day of month Moneyfacts Average Mortgage RateTM LIBOR - 3 month INTERBANK
(FT closing rate on last day of month)
FTSE 100 on last day of month (December 1983 = 1000)
Consumer Prices Index (CPI % change over 12 months) Source: ONS Retail Prices Index (January 1987 = 100) Source: ONS Inflation (RPI % change over 12 months) Source: ONS Underlying Inflation
(RPI % change over 12 months - all items excluding mortgage interest payments)
Average Weekly Earnings Unemployment
House Rebuilding Costs House Price Index
Whole economy GB. Seasonally adjusted. Inc bonuses, exc arrears. Source: ONS * Prov
(Seasonally adjusted - UK) Source: ONS * Provisional
% change over 12 months Source: ABI / RICS
All Houses (January 1983 = 100) Source: Halifax
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015
0.
on first day of month (SVR for existing borrowers)
0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% - 4.88% 4.88% 4.88% 4.87% 4.87% 4.87% 4.88% 4.88% 4.86% 4.85% 4.86% 4.86% 0.53% 0.53% 0.55% 0.56% 0.56% 0.56% 0.55% 0.55% 0.56% 0.56% 0.56% - 6780.0 6844.5 6743.9 6730.1 6819.7 6622.7 6546.5 6722.6 6566.1 6749.4 6946.6 - 1.8% 1.5% 1.9% 1.6% 1.5% 1.2% 1.3% 1.0% 0.5% 0.3% - 255.7 255.9 256.3 256.0 257.0 257.6 257.7 257.1 257.5 255.4 - 2.5% 2.4% 2.6% 2.5% 2.4% 2.3% 2.3% 2.0% 1.6% 1.1% - 2.6% 2.5% 2.7% 2.6% 2.5% 2.3% 2.4% 2.0% 1.7% 1.2% - £482 £479 £477 £478 £479 £482 £485 £484 £489* - 3.3% 3.2% 3.1% 3.0% 2.9% 2.8% 2.8% 2.7% 2.6% 2.5%* - 4.2% 4.3% 5.4% 7.0% 7.0% 6.6% 6.3% 5.7% 5.5% 5.7% 5.4% - 577.5 601.2 603.1 614.0 602.0 605.3 600.4 606.9 600.2 615.3 615.4 -
-
- - - - - -
while index-based funds will be launched covering low to medium-risk profiles. A comprehensive set of retirement planning tools to assist advisers presenting new pension freedom opportunities to clients is also on the agenda, while a new multi- media consumer site -
www.JR.com - will offer support on all aspects of retirement and retirement finance.
“Our objective is to help all middle Britain clients secure the right retirement for themselves and these new products will meet the financial needs of this wide community,” said Stephen Lowe, Director at Just Retirement.
that consumers have received relevant warnings and whether they have taken regulated advice or guidance from Pension Wise. While the rules are being introduced without consultation, the regulator will undertake a review of ‘at- retirement’ rules in the summer of 2015 and will consult at that time on whether any changes need to be made.
Claire Trott, Head of Technical Support at Talbot and Muir, said the policy statement was not as detailed as they had anticipated it would be. “I believe that the questions and associated risk warning should be set out in more detail to ensure that all consumers are being given the same information in response to the same question,” she added. “The FCA could then be comfortable that the correct level of detail is given to the clients.”
Annuity sales slump by 64% in Q4 2014
Annuity sales in the final quarter of 2014 were almost two-thirds (64%) lower compared with the same period in 2013 as the pension reforms continued to take their toll, writes Tim Leonard.
According to the Association of British Insurers (ABI), the number of annuities sold also fell on the previous quarter by 28%. With the percentage fall in the number of annuities sold greater than the percentage fall in the value of annuities, more people with smaller pension pots appear to be deferring or taking cash.
Meanwhile, the number of drawdown contracts sold by ABI members was slightly lower than the previous quarter but has more than doubled compared with Q4 2013, with a reduced average pot size. The value of drawdown contracts sold by ABI members is over 50% that of the value of annuity sales, compared with around 20% a year ago.
“These figures show savers with larger pension pots continuing to buy annuities, while others are entering drawdown with smaller funds than in the past,” said Rob Yuille, Manager of Retirement Policy at the ABI. “More people are clearly taking cash, but many are still making an active choice to buy an annuity with a small pot.”
Pension saving
reaches record high The Office for National Statistics has revealed that pension saving is now at its highest level since records began in 1997, writes Tim Leonard.
The Annual Survey of Hours and Earnings statistics for 2014 shows pension membership is rising across all age groups, with more than five million workers being brought into a scheme through automatic enrolment. Last year, 59% of all workers were active members of a pension scheme, up from 47% in 2012, while in the private sector 49% of employees were active members, up from 32% in 2012.
In terms of membership across different age groups, the largest increase was seen among those aged 22 to 29, up to 53% from 36% in 2013, while membership has increased for every earnings band in the private sector for full-time employees.
“The rise in the proportion of people saving for retirement over the past three years is stunning,” said Steve Webb, Minister for Pensions. “This is due in no small part to the success of automatic enrolment, which is changing the culture of pension saving in Britain.”
March 2015 Investment Life & Pensions Moneyfacts ® 7
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