Out-Law News 2 min. read
22 Oct 2014, 5:18 pm
A proposed amendment to the Pension Schemes Bill, which is currently before the UK parliament, would create a new criminal offence of "falsely claiming to be giving pensions guidance under Treasury arrangements" if adopted. The government has also proposed that those providers it designates to give guidance be held liable for any loss suffered by pension scheme members if they did not comply with regulatory standards set by the Financial Conduct Authority (FCA).
"The government has recognised the fact that a fraudster could claim to be authorised to give pension savers guidance under the arrangements set up by the Treasury," said pensions expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com. "Even though pension trustees and providers would be obliged to inform pension savers where to find the guidance, a fraudster could approach savers and claim to be a designated provider. Those fraudsters risk imprisonment for up to 51 weeks in England and Wales, which should prove some deterrent."
"In addition, the government is doing its best to ensure that guidance providers meet FCA standards. Pension savers will have the right to bring a claim for any loss. This potential liability, combined with the FCA's role, should help to ensure the guidance meets the standards," he said.
The amendments will be considered at a meeting of the committee of MPs appointed to scrutinise the bill on 28 October.
From April 2015, members of defined contribution (DC) pension schemes will have more freedom to access their pension savings in any way that they wish from the age of 55, without facing heavy tax penalties or necessarily having to buy an annuity. This new freedom is to be backed by a right to guaranteed free and impartial guidance at the point of retirement.
Last week the government appointed Citizens Advice Bureau as providers of face to face guidance, and the Pensions Advisory Service to provide telephone guidance. It is also developing a website to provide online guidance. The guidance will be tailored and personalised, but will not recommend specific steps, products or providers in the same way as regulated financial advice. The guidance services will be funded by a levy on the financial services industry.
The FCA will be given the power to set the minimum standards to be followed when guidance is provided, but will not formally regulate designated providers. A consultation on what the regulator expects to see from designated providers closed last month. Earlier this week David Geale, the FCA's director of policy, told the committee of MPs that the purpose of the guidance would be to ensure that savers "walk away from that conversation knowing where to go next and what to do next", which could include seeking regulated advice if necessary.
"Our role ... will be to make sure that firms of delivery partners stick to the framework of the guidance guarantee; so they stick within that framework of just explaining to people the options available to them and the potential implications of those options, referring them to advice where needed," he told the committee. "Then our role is to monitor that, so we are developing our monitoring strategy for how we will work with the delivery partners to ensure compliance with those standards and that they do not stray into advice."
The FCA had received around 150 responses to its consultation on standards, and would publish the final standards later this year, he said.