FSA fines investment firm 14,000 GBP for 'income withdrawal' failings
22nd February 2007The Financial Services Authority (FSA) has fined Regency Investment Services (Regency) 14,000 GBP for not obtaining enough personal and financial information from customers with small pension pots before advising them on income withdrawal.
Income withdrawal allows people to take a tax-free lump sum from their pension pot and leave the rest invested to provide an income. This is risky because people can end up with less income than expected in retirement. The impact of which is potentially greater for those with small pension pots. Therefore, income withdrawal is only suitable for a limited number of people.
Between January 2003 and March 2006, Regency failed to record enough information about consumers to justify recommending income withdrawal and therefore could not demonstrate the advice was suitable. During this time, it also failed to carry out adequate customer reviews to ensure the advice given continued to meet their needs.
Regency has agreed to conduct a review, overseen by an independent compliance consultant, of all its past income withdrawal sales. Regency is also putting controls in place to ensure any future income withdrawal business meets the required standard.
Jonathan Phelan, FSA head of retail enforcement said:
"Obtaining enough information from customers to ensure the advice given is suitable is an important part of treating them fairly, particularly in areas like income withdrawal, where the wrong decisions could lead to hardship in retirement. The FSA has set out the standards expected in this area and will not hesitate to take action where necessary"
Regency's failings were discovered during targeted work by the FSA into how small firms give income withdrawal advice to people with small pension pots.
