The Financial Services Authority (FSA) will press ahead with plans to force pension providers and advisers to reveal the effect of adviser charging on pension plans at the point of sale.
In a policy statement published today, the FSA said it believes consumers must be able to see the effects of adviser charging on their personal pensions and that this is best done through point-of-sale key feature illustrations (KFIs).
The regulator said will consult further on how to present information on charges in situations where payment of adviser charges is facilitated before funds are invested in a product.
The FSA will also encourage pension providers to use a new format for its effect of charges (EoC) tables presented to personal pension investors.
In their new format, EoC tables should include a column showing the value of the accumulated fund excluding both provider and adviser charges.
Providers will also be allowed to reduce the tables to show only the first five years of the plan and then the final year, when charges are likely to have their greatest impact.
Pension providers will not have to present their own charges in this format for non-advised business, but they are encouraged to do so, the FSA said.
The new format of KFIs, including EoC tables, could be adopted by life and pension product providers as well as drawdown plan providers.
The regulator did not make any new rules about the disclosure of adviser charges from annuities, but said it may consult on this in future.
There was a general belief that KFI requirements are much stricter than they actually are, the FSA said.
Currently, KFIs must only include:
• A regulatory statement;
• A description of the charges to be taken;
• Three projections using growth rates which reflect the investment potential of the product along with certain caveats;
• The headings and contents of a table showing the effect of charges (EoC) in monetary terms;
• The calculation of a summary metric which shows how charges can reduce investment growth. This is commonly called the ‘reduction in yield' (RIY). There is no specific rule on how it should be explained.
EIS and Seed EIS sectors
'Truly making a difference'
Avoidance, evasion and non-compliance
From 6 April 2019