A decade on from when savers were given more freedom with their pensions the FCA has turned its attention to whether advisers are giving suitable retirement income advice.
Guests on this week’s FT Adviser podcast believe this will be a key area of focus for the regulator going forward and advisers should prepare for this.
Last month, the FCA told firms to improve their retirement income advice after it found both good and poor practices across the market.
The City watchdog found while some firms had detailed processes in place, offered specific training on decumulation and used a range of tools to help illustrate complex information to customers, it was “apparent” not all firms were taking account of the differing needs of their customers in this area.
Andrew Tully, technical services director at Nucleus, told the podcast he expects part two of the review will be along “quite soon”.
“There is more to come around ongoing fees as this is something the FCA has talked about a couple of times,” he said.
Tully said a lot of this was focused around record keeping.
“Sometimes it's easy to evidence things like product and investment but a huge amount of advisers do tax planning and things like that,” he explained.
“It's about recording all of these things to show what they are doing for clients on an ongoing basis, which will comfortably justify the fees they charge.”
Also appearing on the podcast, David Haynes, senior financial adviser at Nightingales Wealth Management, looked at how pension freedoms have changed how people take their money and whether the reform was working 10 years on.
He said overall it was positive and the advice world and pensions industry had embraced it.
However one thing Haynes would change was around ad hoc payments to a pension and the emergency tax issue with HMRC.
He said due to changes in the way people work, people would take their pension but also make ad hoc payments while they were still earning.
He said: “Historically the way HMRC would look at it is if someone was leaving employment and going into retirement, there was a clean break.
“But the whole point of flexible pensions was that the edges are blurred and people may continue to work, it's just that they decide how much work they do each year.
“Ad hoc pension payments are treated as recurring income on a PAYE system on a monthly basis and that needs to be adjusted. HMRC should revise their rules to accommodate that and tax it fairly, rather than allow any excess tax to be claimed in a subsequent tax year.”
