l In light of the above, firms must amend information requirements in the annuity comparison template to remove reference to enhanced annuities.
These changes will come into force on November 1 2019. The amendments should give those accessing an annuity without advice the correct information to ensure they consider the option of an enhanced annuity. Those who are eligible for enhancements are those most likely to benefit from an annuity in the current climate due to the poor standard annuities rates. That said, annuities provide a secure income that some people will still want and need, whatever the options available under the pension freedoms.
Drawdown charges
There are already rules about the information that needs to be provided to clients who are accessing drawdown for the first time, but the FCA wants to ensure charges are clear and easy to understand. It has amended its rules, which come into force on April 6 2020, in an attempt to help clients understand.
The major change is that there now needs to be a summary page in the key features illustration. This page will include a monetary amount for the first year of charges, as the regulator believes it would be easier for the client to understand the ongoing cost of their choice to use drawdown if they can see the initial year’s cost in cash terms.
Although showing the amount in cash terms makes a certain amount of sense, there are many variables that could change these charges, so the client could end up paying more or less than the figure shown.
Changes have also been made to communication requirements to ensure the correct information is passed on at the right time, including for those who are accessing uncrystallised funds pension lump sums rather than just drawdown. These include instruction to review the decisions that have already been made as part of the process.
Consultation paper CP19/5
This consultation paper focuses on the need for execution-only drawdown clients to have access to portfolios that should meet their needs throughout the time they are accessing their funds – or not, as the case may be. These portfolios are called investment pathways and must be offered to those clients who move all or part of their pension savings into drawdown, or transfers funds already in drawdown into a new drawdown arrangement – unless they received advice on how to invest all or part of their drawdown fund following either of these transactions.
It is possible for a client that was initially advised to later be deemed non-advised. That is the case if they make investment decisions more than 12 months after their previous advice and transaction, or within 12 months should they fail to confirm that their circumstances haven’t changed.
