As the FCA closes its consultation on the advice-guidance boundary, there are calls for more work to be done to support pension scheme trustees.
Trustees should be given more power to inform scheme members about appropriate retirement choices as part of the Financial Conduct Authority’s (FCA) review of the financial advice sector, according to LCP.
The FCA’s Advice Guidance Boundary Review – the consultation for which closes today (28 February) – has proposed three areas for development: clarifying the boundary between guidance and regulated advice, a new “simplified advice” regime, and so-called “targeted support”.
In its response to the consultation, LCP advocated for greater trustee autonomy to assist pension scheme members in making informed decisions about their pensions and recommended “more freedom to provide more helpful targeted support to members”.
“Trustees tend to communicate the range of options available to members in a factual way, not steering members in any direction and recommending that they take advice on these options,” LCP said. “However, many members do not go on to seek advice. It is also very difficult for members to find the advice they need because many financial advisers are not set up to provide such advice in an affordable way.”
LCP acknowledged the FCA’s efforts in its consultation to provide clarity for trustees but urged additional guidance to prevent inadvertent constraints that could hinder trustees from assisting members effectively.
The consultancy group urged the regulator to reconsider restrictions on providing additional information, particularly regarding defined benefit transfer illustrations, arguing that balanced information could mitigate potential misconceptions arising from only providing members with transfer value data.
In addition, LCP called for changes to the support trustees can offer to defined contribution scheme members during the accumulation phase, such as providing guidance on investment choices and contribution levels, without crossing into financial advice territory.
Clive Harrison, partner at LCP, said: “We find that trustees can be prohibited from providing helpful support to members as it can be seen as too close [to] or crossing the advice boundary. This includes members saving for retirement and also those making retirement or decumulation decisions. Clearer guidance that recognises overriding trustee duties, and allowing sensible information sharing, would allow trustees to move closer to the advice boundary without fear of crossing it.”
The Association of British Insurers has also voiced support for the ‘targeted support’ proposals from the FCA. However, in a recent column for Pensions Expert, senior policy adviser George Ritchie outlined important questions that need to be answered to ensure trustees can provide appropriate guidance without falling foul of rules related to marketing communications, as well as regulated advice.
