The regulator also wants to break the link between tax-free cash and income. This would mean clients could take their cash without the need to enter a drawdown arrangement, thus giving them time to shop around for the best option while still having access to their money. This will require significant legislative change and the FCA will be passing on its research to the government to consider the merits of this option.
On the technology front, the watchdog wants to promote and support the use of technology in retirement and decision making, and will host a Pension ‘TechSprint’ later this year. The aim of this event is to challenge tech providers and industry to come up with innovative solutions to some of the emerging issues raised in the interim report, such as a lack of engagement and shopping around.
Improving transparency
To ensure those in drawdown receive regular information even if they aren’t taking income, the FCA is proposing providers must present a key features illustration when exercising drawdown options or equivalent contract variations, and supply information on an annual basis for consumers who have entered drawdown but not taken any income.
Finally, the watchdog is working closely with the Association of British Insurers and Money Advice Service to develop a new drawdown comparator.
There are many good proposals in the FCA’s document, most of which have been taken forward for formal consultation, and we await the outcome of that to see if there are any significant changes. The impact some of these will have on day-to-day processes and costs means the pensions industry will certainly have very strong views.
Claire Trott is head of pensions strategy at Technical Connection
