In this issue, Dr Matthew Connell takes a look at pension income advice and BSPS retention rules
Thematic review of pension income advice
The Financial Conduct Authority (FCA) has launched a thematic review assessing the advice consumers are receiving on meeting their income needs in retirement.
It described the review as “a piece of discovery work to explore how financial adviser firms are delivering retirement income advice and assess the quality of outcomes consumers are getting”.
The FCA will be looking at the quality of both initial and, where relevant, ongoing advice.
The FCA went on to explain that its wider Assessing Suitability Review 2 had been paused to allow resources to be concentrated on its response to Covid-19. The review continues to be on hold while the new thematic review focuses on the more specific issue of how the retirement income advice market is functioning. The FCA said it “will also focus on how firms are responding to changing consumer needs as a result of the rising cost of living”.
The FCA will begin the review in Q1 2023 and aims to publish a report setting out its findings in Q4 2023. The results will also feed into the FCA’s supervisory work connected with the Consumer Duty.
The FCA said: “Firms selected for the review can expect to be contacted early in 2023.”
BSPS retention rules extended
In January, the FCA published a policy statement, PS23/1, confirming that the temporary British Steel Pension Scheme (BSPS) asset retention rules will be extended so that they continue to apply until firms have resolved all relevant BSPS cases that are subject to the rules of the BSPS consumer redress scheme, as well as other relevant BSPS cases outside the scheme.
The FCA said: “This intervention will help ensure that the firms responsible for giving bad BSPS advice meet the cost of the redress liabilities that arise and reduce the risk that the firm fails, with costs being passed to Financial Services Compensation Scheme (FSCS) levy payers. Accordingly, the intervention increases the likelihood that the ‘polluters’ that cause consumers harm and give rise to redress liabilities meet the cost of those liabilities. Where firms do fail, the intervention is designed to increase the likelihood of an orderly wind-up of the firm, reducing the impact on FSCS levy payers.”
The FCA also published a Dear CEO letter, which sets out its expectations of firms that have either received proceeds from a BSPS transfer or continue to be involved in managing the transferred assets, under the BSPS consumer redress scheme.
New financial promotions rules
A new authorisations gateway is being introduced, which will mean firms need to apply to the FCA if they wish to continue or start approving financial promotions for unauthorised persons. Currently, any authorised person can generally approve financial promotions for unauthorised persons.
The FCA published a consultation paper (CP22/27) in December 2022, which includes proposals on how it intends to operationalise the gateway, including proposals on assessing applications and regulatory reporting.
Dr Matthew Connell is director of policy and public affairs of the CII