PS15/4: Retirement reforms and the guidance guarantee

In this Policy Statement we publish the final rules in respect of retirement risk warnings. The rules have been made without consultation, in reliance on section 138L of the Financial Services and Markets Act 2000.

Why are we publishing this paper?

From April 2015, consumers will have greater choice about how they access their Defined Contribution (DC) pension savings. We are concerned that consumers, who do not take regulated advice, may not have enough information to make these important decisions, which for some may be irreversible.

Last year we produced near final rules requiring firms to tell their customers about Pension Wise, and to include a recommendation, in customer communications about retirement options, that consumers consult Pension Wise or take regulated advice. We stated that we would consider the need to strengthen consumer protections further in our rules.

We have since reflected on the protections offered in our rules, and considered wider feedback on the impact of the new pension flexibilities. We now consider that the risk to consumers in this area is great enough for additional protections to be required before the April 2015 changes.  Any delay in introducing rules would increase the risk of poor outcomes for large numbers of consumers who decide to access their pension savings over the first months following the introduction of the new pension flexibilities.

Policy Statement 15/4 [PDF]

Who does this Policy Statement affect?

This Policy Statement will be of interest to:

  • providers of pensions, including operators of Self Invested Personal Pensions (SIPPs)
  • providers of retirement income products
  • firms facilitating access to pension savings on an execution-only basis
  • trustees of DC pension schemes (and schemes with a DC element)
  • employer sponsors of DC schemes (and schemes with a DC element)
  • providers of other financial services and products that play a role in consumers’ retirement planning
  • those providing advice and information in this area already
  • distributors of financial products, in particular retirement income products
  • trade bodies representing financial services firms
  • consumer representative bodies
  • charities and other organisations with a particular interest in retirement or financial services more generally
  • individual consumers

What are the next steps?

The new rules described in this Policy Statement will come into force on 6 April 2015. Firms operating personal pensions, stakeholder pensions, selling pension decumulation products or facilitating the access of pension savings on an execution-only basis must make any changes necessary to comply with the rules before they come into force.

We plan to consult in summer 2015 on whether to retain, modify or add to these rules, as part of a wider consultation on the rules around consumers’ interaction with providers as they approach retirement.

The Pension Regulator will be publishing complementary guidance for trustees following the laying of amendments to the Disclosure regulations before Parliament. The guidance will provide clarity for trustees on the new requirements to signpost pensions guidance. In addition, it will set out the Regulators expectations of trustees in relation to the provision of information to their members on the generic risks of the decumulation options.

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