FSA consults on changes to its handbook following government reforms to workplace pension schemes
9th November 2010The Financial Services Authority (FSA) has published a consultation paper outlining changes to the FSA Handbook following the Government's confirmation of the workplace pension reforms.
These reforms will significantly change the pension landscape so the FSA must ensure consumers remain adequately protected and that interactions between FSA and Department of Work and Pensions (DWP) rules do not create unnecessary barriers within the workplace pension market.
The policy proposals broadly fall into two categories: the use of group personal pensions (GPPs) for automatic enrolment; and protecting consumers in the changing pension landscape.
Group personal pension schemesThe consultation paper proposes to make a number of additions and changes to Handbook text relating to GPPs, including:
- making it clear that automatic enrolment does not fall within the scope of the Distance Marketing Directive (DMD)*; and
- clarifying that FSA and DWP rules for cancelling and opting out are interchangeable and that only one process needs to be followed - in essence providing a single solution rather than two different, potentially confusing and costly procedures to follow.
The FSA already has rules in place to mitigate the risk of poor advice being given in relation to occupational pension opt-outs, but these do not currently apply to GPPs.
To ensure those automatically enrolled into a GPP receive the same protections as those who are part of an occupational pension, the FSA propose to extend the scope of its rules to cover all workplace schemes - including GPPs.
Similarly, the FSA proposes to extend rules around additional contributions to encompass all workplace schemes. Currently the Handbook stipulates that advisers must consider arrangements within an existing workplace scheme before recommending alternatives, but this does not include GPPs.
Sheila Nicoll, the FSA's director of conduct policy, comments:
"These proposals mainly affect those involved in the provision, distribution and operation of group and individual personal pensions. But anybody who has a pension now, expects to make contributions in the future, or who will be automatically enrolled from 2012 will also be affected.
"ith the introduction of automatic enrolment and the National Employment Savings Trust, the pension landscape is going to change significantly. It's crucial that we update our requirements so consumers are protected and we identify and remove any overlaps between FSA and DWP rules that might create unnecessary barriers for employers."
The consultation period will close on 9th February 2011.
* DMD prohibits inertia selling of distance contracts, i.e. a lack of a response cannot be taken as consent.
