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17 July 2014

 

The Association of Professional Financial Advisers (APFA) has today responded to the Financial Conduct Authority’s consultation on revised terms of reference for its retirement income market study. According to APFA, the FCA should focus on studying the information consumers receive in the run up to retirement, including the soon to be introduced guidance guarantee, to ensure they are in the best position to make informed retirement decisions.

 

Chris Hannant, Director General at APFA, said:

“While we agree that the FCA reviews the retirement income market, it must recognise that pensions in the UK are in the midst of an unprecedented period of change. It must therefore bear those changes in mind, as their impact will take some time to fully materialise.

 

“At the same time, the introduction of the guidance guarantee does not alter the underlying market structure of how a retiree can access their fund.  The basic choices remain the same. So a close examination of the communication from incumbent pension providers, how consumers react to it and understanding the reasons why they do so, is vital to better understand what drives behaviour in the market.    

 

“We also believe that the guidance guarantee should make very clear the benefits of receiving advice. Speaking to a regulated adviser is beneficial and cost-effective in the long run as they can explain the different annuity options and also advise on other options such as drawdown and phased retirement.” 

 

According to APFA, the FCA review should focus on the following as part of their market review:

 

• Continuing to monitor developments after the guidance guarantee is introduced as the impact of the all the changes will take some time to fully materialise.
• Doing more to understand what drives current consumer behaviour, by looking at the communications from pension providers and how and why the consumers react to this and make decisions.   
• Once the guidance guarantee is introduced, examine whether consumers have a clear understanding of their options and where to go next to ascertain whether the market is functioning.

 

To read APFA’s full response, please visit http://www.apfa.net/policy/responses/APFA-response-FCA-retirement-income-market-study-july-2014.pdf.

 

ENDS