Pensions decumulation should be included in the Financial Conduct Authority’s proposed simplified advice rules, according to the Association of British Insurers.
George Ritchie, senior policy adviser in the body’s long-term savings team, told FT Adviser the ABI has included this suggestion in its response to the FCA’s advice guidance boundary review, which closes to feedback tomorrow (February 28).
Although the regulator said decisions around pension decumulation were too complicated to be part of its simplified advice regime, the ABI thinks this is a reason why it should be included.
Ritchie said: “Decumulation has been excluded because it is too complex but our position is it should be included because the potential harm of getting that wrong is so high.
“There are a lot of areas where one-off advice could be needed within retirement.”
Back in December, the FCA said the complicated nature of decumulation decisions around drawdown and annuities, meant it would be excluded.
The regulator has also set a £85,000 limit on simplified advice, which makes it harder to cover decumulation advice.
The ABI thinks this figure should be increased to £225,000, the amount the average earner in their 30s is predicted to have in their DC pension pot at retirement.
Ritchie added: “We would argue this limit needs to be raised significantly.
“We suggested £225,000 in our response as somewhere around that mark would be more geared to people with average earnings who could benefit from this.”
In its response to the regulator, the ABI suggested it pause its work on further clarifying the advice guidance boundary and focus on the other two aspects of the proposals: simplified advice and targeted support.
Targeted support would give firms the ability to use limited information about customers to make suggestions appropriate for people like them.
While with simplified advice firms could offer advice using information only information relevant to a specific consumer need.
Elsewhere, Ben Hampton, chief executive of Wealth Wizards, told FT Adviser simplified advice might see some more work around decumulation.
But overall, as a member of the industry working group consulting on the review, he was supportive of the measures saying the regulator and government have been attentive throughout the process, making it an enjoyable project to work on.
tara.o'connor@ft.com
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