FCA warn of pensions risk

FCA pensions
22 April 2016

The Financial Conduct Authority have said that there's significant risks for those who decide to sell off their retirement income, and they're worried that some pensioners may run out of money in their twilight years.

People will be allowed to sell their annuity from April 2017, exchanging some of their retirement funds for a lump sum of cash.

The FCA are worried about the whole thing, and have showed concern for those who might struggle to work out what is the best move for them, and that some may not get good value for their trade.

There's also a concern about people scamming older, more vulnerable people out of money.

The FCA has said that "there is a significant risk of poor outcomes" for consumers selling their annuities. Christopher Woolard, who is the director of strategy and competition at the FCA, said: "We recognise that some consumers may be particularly vulnerable."

"We have set out proposed rules and guidance that will help ensure that consumers have an appropriate degree of protection should they decide to sell their annuity income."

So, what are these proposals? Let us have a look at them shall we?

  • A requirement for those selling to seek financial advice for annuities over a certain value
  • An extension to the free Pensions Advisory Service
  • People selling their annuity to be given specific warnings of the risks and dangers very early in the selling process
  • Consent to be gained by brokers from anyone else who benefits from the annuity, like a spouse, before it gets sold
  • Brokers and advisers to put their charges up front to customers
  • A 14-day cancellation period and access to the Financial Ombudsman if sellers aren't satisfied

With no focal point for people selling their annuity to go, this could get very messy, and very confusing. Finance companies are going to make their own demands too, which is only going to make the whole thing messier.

The Association of British Insurers say that there's a host of issues to sort out before April 2017. Can they do it?

It might be worth hanging fire until the market gets settled, if you're thinking of selling some of your retirement funds.

TOPICS:   Economy   UK News

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