Additional protection for those accessing their pension pot from April is to be introduced, the City watchdog has announced.
The Financial Conduct Authority (FCA) has written to the chief executives of pension providers to outline the new rules, which will give consumers extra protection if they choose to access their pensions under the new pension freedoms coming into force in April (see our Pension Need-To-Knows guide for more on this).
In its letter, it says that as a "second line of defence", from April providers will be required to ask those looking to take out their pensions about key aspects of the circumstances that relate to the decision they're making.
The pension provider will then be required to give relevant risk warnings in response to the answers it receives. For example this could include warning of the tax implications of any decisions, and how any health issues could affect people's choices.
Providers will also have to highlight that impartial guidance is offered by Pension Wise (see the Free pension guidance service branded 'Pension Wise' MSE News story), and that this, as well as regulated advice, is an important part of the process when making irreversible decisions.
The FCA adds that these messages have to be delivered in "direct and simple language" that savers will understand.
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What happens if pension providers don't follow the rules?
Pension providers will have to keep a record of any interaction they have with savers wishing to access their pension. If the FCA finds that any providers are failing to follow the rules it can use its "full range of regulatory tools" to ensure providers do so.
When will the new rules come into force?
The rules are being introduced on a temporary basis from 6 April, but are still subject to agreement from the FCA board. The FCA says the reason they're temporary to begin with is because it doesn't want to delay their implementation with the consultation.
The rules will be confirmed following agreement from the FCA board.