Steven Cameron, Aegon’s Pensions Director sets out what Aegon believes should be the FCA’s priorities in its 2019 review: “Since the RDR and FAMR were implemented, the need for advice and the value it provides have continued to grow. The 2019 review offers a real opportunity not just to assess effectiveness against the original aims of the reviews, but to reflect on recent changes and look ahead at how regulation can best meet the future needs of both consumers and advisers.
“We are keen for the FCA to refocus on closing the ‘advice and guidance gap’. Recent measures to protect individuals who don’t seek advice are helpful, but enabling more people to get advice would be a better solution. One area where there is a real risk of a growing advice gap is for members of defined benefit schemes where advisers are struggling to obtain affordable or adequate Professional Indemnity Insurance. While a DB transfer is unlikely to be in the majority of peoples’ interests, having a market where only a minority are able to even explore whether it’s suitable is not helpful.
“Looking at specifics, we support allowing individuals to pay for advice out of the funds within pension and investment products. However, we don’t see a need for both Adviser Charging and the Pensions Advice Allowance and believe a merger of these would simplify arrangements. We’d also like to see the FCA renews its efforts to move to risk-based FSCS levies for intermediaries. And we’re keen for the FCA to offer more practical support to employers to grow advice and guidance through the workplace.”
Refocus on closing the ‘advice gap’
“While Aegon research shows advisers continue to support FAMR principles, there has been disappointingly little practical change, and no real sign of the advice gap reducing. Recently, the FCA has been focused on developing protections for non-advised customers, including those exercising pension freedoms. While helpful, we believe the emphasis now needs to return to facilitating more people receiving advice.”
Address the advice gap for DB transfers including seeking solutions to PI problems
“The demand for advice on DB transfers continues to outstrip supply, so there’s a definite ‘advice gap’ here. The supply of DB transfer advice has been further hampered by the challenge of obtaining affordable Professional Indemnity insurance. We hope the FCA will take a keen interest in looking innovatively at how to address this.”
Merge Adviser Charging and the Pensions Advice Allowance
“FAMR introduced the concept of the Pensions Advice Allowance which allows individuals to take up to £500 from their pensions up to 3 times to pay for broad retirement advice. The RDR had already introduced Adviser Charging which has no limit on amount or frequency but can only be used for advice on the pension from which it is taken. The similarities mean PAA is not widely offered or asked for and we’d strongly support merging the two. We appreciate that this is not fully within the FCA’s remit and would welcome HMRC allowing AC to be used for broader retirement planning.”
Risk based FSCS levies
“Since FAMR, and in line with Aegon lobbying, the funding of the FSCS has been reviewed with providers now paying 25% of intermediaries’ levies. We continue to support the FAMR proposal to move to risk-based levies as a means of sharing costs more fairly across intermediaries, reducing the burden on the vast majority of well managed professional adviser firms and passing it to those who choose to undertake higher risk activities such as advising on unregulated investments.”
Advice through the workplace
“A range of FAMR recommendations were designed to make advice more accessible through the workplace. However, employers continue to struggle to understand what they can and can’t offer without crossing into regulated advice. Industry, FCA and the Pensions Regulator should work together to encourage more employers to engage a regulated adviser and to better promote the fact that employer-paid advice up to £500 is exempt from ‘benefit in kind’ taxes.”
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