Aegon welcomes the FCA’s decision to revise the approach to its Retirement Income Market Study in light of the budget announcements which will mean the retirement income market post April 15 will be dramatically different to that which exists today.
However, it believes the revised Terms of Reference still point to a possible conflict between Government policy and FCA regulation. The Government wants to give those with Defined Contribution pensions full freedom and choice over their retirement options. But the FCA seems more focussed on identifying potential detriment and might pre-empt the changes with new regulatory controls.
Aegon believes it is too early to predict the post April 2015 market. We may see new tax rules accompanying the new retirement flexibilities which could have a big impact on what’s best for customers and what solutions providers may offer. Also, the scope of the Guidance Guarantee and how it integrates with other guidance and advice services will have a big impact on consumer behaviour and choice.
However, Aegon believes one very live and pressing issue should be added to the Terms of Reference – that is whether limiting delivery of the Guidance Guarantee to one or a very few utilities is justified on competition grounds and if banning provider involvement could lead to consumer detriment.
Steven Cameron, Regulatory Strategy Director at Aegon says:
‘We support the FCA’s intention to be forward thinking in its Retirement Income Market Study. But with big question marks over the scope of the Guidance Guarantee and the detailed tax rules, which will emerge after the Budget Consultation, it will be very difficult to reach any firm conclusions around consumer behaviour, new solutions and possible areas of detriment. In reality we won’t know the likely shape of the new pensions environment until early next year at the earliest’
‘Providers are considering how best to serve customers who will have more control over how they take their income and we would welcome FCA undertaking high level consumer research into attitudes towards different retirement options and how consumers might be helped to understand these better. But if any findings from the Market Study are to be fed into the development of the Guidance Guarantee from next April, they must report back well before their current year end plan.’
‘One pressing decision the Government will make is whether to allow providers to offer the Guidance Guarantee. The revised Terms of Reference highlight the FCA’s new objective to promote effective competition which can lead to more innovation and provide a broader range of better products and services that meet consumer needs. The Guidance Guarantee is one such service and we call on FCA to determine how it can open up a competitive market here and allow providers to add this to the ways they support their customers.’
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