The Financial Services Authority has delayed the decision over RU64 until the early part of 2007, because of the uncertainty over personal accounts.
In the 350-page consultation paper ‘Reforming Conduct of Business Regulation’ the FSA sets out changes to the conduct of business (COB) regulations, including how it will be affected by the rules relating to the Markets in Financial Instruments Directive (MiFID).
It also uses the document to outline changes to the main rules for pension schemes even though it admits pension schemes are not MiFID instruments themselves and the Directive’s provisions are not directly relevant to any of the pensions topics covered such as product disclosure and suitability, also known as RU64.
The rule, 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, the FSA announced the final decision would be delayed until details of the proposed personal accounts became clearer, but the latest consultation paper has further delayed the issue.
The FSA now says it expects to announce the final decision on RU64 in the early part of 2007, providing there is “sufficient detail available at that time about the new national pension scheme”.
So as an interim measure, “pending a decision on the future of RU64”, the FSA says it is planning to carry the existing rules forward into the new sourcebook known as NEWCOB, and will fall under NEWCOB 21.2.
However, while the FSA is still undecided about RU64, it has announced plans to remove the need for decision trees to be given to any consumer considering a stakeholder pension.
It says it has made the decision to remove the requirement as the prescriptive content and presentation is no longer consistent with the FSA’s move to principles based regulation.
In addition, the FSA argues the move would cut costs for firms and would not be detrimental to customers as it intends to continue producing its own consumer factsheet version for those people who remain non-advised.
And it also says figures from the Association of British Insurers (ABI) reveal 95% of stakeholder sales in 2005 were through financial intermediaries which suggests these people were advised, leaving just a “small proportion” of sales where a “do-it-yourself decision tree was relevant”.
Meanwhile, the FSA rules on an annuity open market option (OMO) remain unchanged as do the rules relating to pension transfers, as it says the watchdog has “noted the potential for increased activity with pension transfers” following A-Day, as consumers “decide or are advised to consolidate their various pension scheme benefits”.
But the NEWCOB draft rules do slightly alter the regulations on product disclosure, so firms will no longer have to provide key features documents for trustees to pass onto members of occupational pension schemes, unless it relates to a member’s decision to top up their benefits with additional voluntary contributions (AVC).
That said, rules do still require firms to regard trustees of occupational pension schemes as investors when they buy a packaged product and provide them with a specimen product disclosure.
The deadline for responses to the consultation on the MiFID elements is the 28 November, while responses on all other aspects of the consultation are requested by 23 February 2007.
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 7968 4558 or email [email protected]IFAonline
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