FSA fines Regency over income withdrawal advice

Income withdrawal allows people to take a tax-free lump sum from their pension pot and leave the rest invested to provide an income, which is risky because people can end up with less income than expected in retirement.

The FSA says the impact of this is potentially greater for those with small pension pots and 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.

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 of all its past income withdrawal sales and it is putting controls in place to ensure any future income withdrawal business meets the required standard.

Jonathan Phelan, head of retail enforcement at the FSA, says: "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."

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].

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