Providers are concerned intermediaries could be confused by the need to present consumers with a different forms of pension term assurance (PTA) key facts documents, once they have decided whether they sell the product under ICOB or COB rules.
Clarification issued recently by the Financial Services Authority confirmed intermediaries with both insurance conduct of business (ICOB) and conduct of business (COB) authorisation will be able to conduct PTA business with consumers.
However, further confirmation from the FSA reveals advisers will need to check carefully they present consumers with the correct documents, as COB rules require issuance of a ‘key features of a pension term assurance’ document – which cannot carry the FSA’s keyfacts logo – while ICOB requires a ‘product summary key facts document’ be issued in order to comply with differing regimes.
As it stands, ICOB intermediaries are allowed to sell PTA and issue a ‘keyfacts’ as long as they issue no further guidance on the impact this could have on their pension arrangements, unless they hold FSA authorisation to do so, but a ‘reasons why’ letter will also have to state the intermediary is unable to advise any further on the matter in relations to pensions, but the product may not be appropriate in relation to their pension needs.
Protection officials say it is unlikely a COB-authorised intermediary would choose to complete business under ICOB rules, as best advice would be to ensure any change in PTA does not affect the client’s lifetime allowance in the long-term.
Mark Davies, technical manager at progress from Royal Liver, says this doesn’t appear to be FSA best practice and could be confusing as the documents are virtually identical but still have to be treated separately under FSA regulation.
“Feedback we have had from IFA firms suggests where there are both ICOB and COB-regulated advisers, only COB advisers will be allowed to sell pensions life cover through COB, otherwise they will be trying to meet two different regulatory regimes at the same time, and that is impossible to police,” says Davies.
Andy Milburn, IFA market manager at the same firm, points out policing such documents will require additional time-consuming checks to establish the right papers have been issued under the right regime.
“We would welcome the FSA reconsider their stance on this issue, as there is little we can do to police the end result, and it will fall on the FSA inspectors to check authorisations,” says Milburn.
The FSA has said it will review the regulation of PTA when it reassesses COB rules in 2007.
Moreover, a spokesman for the FSA suggests the regulatory body is likely to move away from the use of ‘Key Feature’ documents eventually.
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