Pension firms must ask consumers more questions, says City Watchdog

Companies will be required to ask about health and lifestyle choices or marital status, to protect consumers who do not take up the government’s offer of the Pension Wise guidance guarantee service

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The Independent Online

The City Watchdog has told pension firms to ask consumers more questions to help protect them from making a serious mistake when new pension freedoms come into force in April.

The Financial Conduct Authority has today written to chief executives of pension providers to outline plans to introduce additional protection for those accessing their defined contribution pension pot, a so-called second-line of defence for consumers.

Companies will be required to ask about health and lifestyle choices or marital status, to protect consumers who do not take up the government’s offer of the Pension Wise guidance guarantee service. Pension firms will then have to give consumers risk warnings, such as the tax implications of whatever decision they make.

Firms will also have to further highlight the availability of the government’s new Pension Wise scheme or regulated advice.

Christopher Woolard, director of strategy and competition at the Financial Conduct Authority said: "The decisions consumers make about what to do with their pension pot are important and in some instances these choices are irreversible. We want to make sure that people have the help they need to make those choices."

Pensions expert Ros Altmann said: "At long last! Having called for this for years I’m delighted. Now the industry needs to rise to this challenge."

Tom McPhail of Hargeaves Lansdown said: "This is an important safeguard for retiring pension investors. For the past five years we have lobbied for better regulatory protection of pension investors. Today FCA has delivered."

Stephen Lowe of Just Retirement said: "This was a gap that could have wrecked the pension freedom reforms had it not been plugged."

Firms will be required to deliver these messages in a direct and simple language which will be set out when the new rules are published. 

The new rules will come into effect on 6 April.

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