The Financial Services Authority board has confirmed it is going to keep in place the rule known as RU64.
Originally the decision on RU64, which requires advisers to state why the product they are recommending is at least as suitable as a stakeholder pension, has been the subject of a lengthy consultation as to whether or not it should be removed.
In May 2006 the FSA announced the final decision would be delayed until details of how personal accounts would work became clearer, but a consultation paper in October on ‘Reforming Conduct of Business Regulation’ further delayed the issue.
It stated at the time it did not expect to announce the final decision on RU64 until the early part of 2007, providing there is “sufficient detail available at that time about the new national pension scheme”.
As an interim measure, “pending a decision on the future of RU64”, the FSA stated in its consultation that it would carry the existing rules forward into the new sourcebook known as NEWCOB, and would fall under NEWCOB 21.2.
However today in a 16-page feedback statement the FSA has announced: "After careful consideration of all the relevant information and further intensive discussion with stakeholders, we have decided to retain the rule in our Handbook".
"We do not believe that a sufficient case has been made to enable us to remove the RU64 rule. We also took account of our move towards more principles based regulation, but consider that RU64 is an example of a situation in which it is appropriate to retain a detailed, prescriptive rule."
It adds in view of "continuing concerns over the general quality of investment advice and the importance of pensions savings to the long-term financial well being of consumers, the retention of the detailed RU64 rule is warranted".
The FSA adds the proposed introduction of personal accounts has not affected the decision to retain the rule, instead it says "we are not convinced the rule operates to limit advice to those consumers who are already in the market to receive it".
"Our conclusion is future consumers of personal and stakeholder pension schemes will require the extra protection of the RU64 rule".
However the Financial Services Consumer Panel (FSCP) has welcomed today's decision, saying promotion of the simplest pensions with the lowest charges, currently stakeholder, would not happen unless advisers had a “specific direction that they must highlight its existence to consumers for whom it is most suitable”.
John Howard, chairman of the FSCP, says: "Recent research showed that advisers do not always recommend products which provide limited or no financial gain to them, and abandoning the requirement to point out the existence of stakeholder pensions could have led to mis-selling especially in the run up to the introduction of the new National Pensions Savings Scheme."
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 Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
‘Important to have an anchor’
Lack of innovation for solutions
Some 2,000 consumers affected
Achievements, charity work and other happy snippets