FCA turns spotlight on pensions at retirement after budget shake-up

Alexander Newton

The Financial Conduct Authority (FCA) is to monitor the impact of the chancellor’s dramatic pensions overhaul, announced in the Budget.

The regulator is to turn its attention to at-retirement advice and the decumulation product market in the aftermath of the Budget.

In the Budget chancellor George Osborne announced measures to dramatically increase flexibility of pensions at retirement, cutting the 55% tax charge for people accessing their entire pension at retirement from 2015.

Under the plans, savers who take their pension as cash will get the first 25% tax free with the remaining 75% taxed at their marginal rate.

The FCA said that the changes could lead to more complex products being brought to market and increase the price of advice leaving less wealthy clients at a disadvantage.

The FCA said that although it has not seen much innovation in decumulation products to date, this was likely to change following Osborne’s announcement.

It said the changes could lead to risks around product design and distribution.

In its Risk Outlook for 2014-15, it said: ‘Risks that look to be on the rise in this area include the design and distribution of pension products and in the design and development of products that capitalise on other stores of wealth, [predominantly property, such as equity release],’

It said providers might design products too complex for the non-advised market, meaning they could not be understood or purchased without advice.

It also warned that retirees with smaller pots may not have access to some of the more innovative solutions