FCA focus and defining the benefit of advice
The advent of pension reform in 2015 has seen a huge surge in interest from people looking to give up defined benefits for more ‘freedom and choice’. In many cases, this is the appropriate course of action. However, the regulatory guidance starting presumption for advice runs counter to this. And the prevalence of contingency charging raises the spectre of conflict of interest. For clients, advisers and their firms the risks are all too apparent.
Whilst many would cite flexibility of income and generational financial planning as reasons for moving away from a more secure arrangement, primarily, people may not have fully appreciated the value of the guaranteed income offered by the scheme. In fact, where drawdown is discussed, it can be difficult to compare ‘value’ between these two different types of benefit structures. There are, however, some new ideas from the regulator in how this might be achieved, taking into account the key differences.