General Insurance Article - Industry comment on FCA final LISA regulations


The regulator has published a response to the consultation, which provided details of how it is changing its handbook to accommodate the arrival of the new savings product. The FCA said it would require firms to go further than initially proposed on risk warnings to people interested in using a lifetime ISA. Firms will be required to warn about the loss of employer contributions for personal pensions as well as workplace pensions. In addition, because of the possibility that investors may not consider the impact of taking out a lifetime ISA on means-tested state benefits a further risk warning has to be included to address this point. Hymans Robertson and Aegon both comment below

 Commenting on the FCA’s response, Malcolm McLean, Senior Consultant at Barnett Waddingham, said: “It seems the message has finally got through to the FCA of the potential damage the Lifetime ISA could do to pension saving and the risks consumers face in missing out on employer contributions to a pension plan. There is also the real issue of the risk of loss of means-tested benefits that also needs to be highlighted up-front.

 “It remains unseen whether these warnings on their own will suffice. The FCA is not making the taking of financial advice a mandatory requirement but I can’t help feeling that for many people advice, or at the very least guidance, will be necessary if they are to avoid making financial decisions which they may come to regret at a later stage”
  

 Commenting on the FCA’s publication of its final regulations around the Lifetime ISA, Steven Cameron Pensions Director at Aegon said: “The Lifetime ISA was first announced in the 2016 Budget and a day before the 2017 Budget, 30 days before official launch, we now have the final FCA regulations. We support providing LISA investors with extensive risk warnings including the two new ones concerning means tested benefits and the risk of losing matched employer contributions to individual as well as workplace pensions. However, with the potential for a LISA to be held for 40 years, we believe the FCA should have gone further in specifying ongoing information and risk warnings, for example to prompt a review of investment strategy if objectives change from house purchase to retirement funding.”

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