A useful checklist for appropriateness • Is it measurable? • Are outcomes considered? • Is it meaningful to the customer? • Can it explain risk? • Is it simple to understand? • Is it realistic for income?
Example age related check • Outcome defined as likelihood of sustained income over life • At a 3 out of 5 risk level ie a 70% chance • Using income increasing at 3% pa
Explaining it all to your customers
COBS19 is prescriptive for the journey 1 How do you want to select your investments? 2 What is your objective? 3 Here’s information on your fund
COBS19 is prescriptive for the journey 1 How do you want to select your investments? 2 What is your objective? 3 Here’s information on your fund
Explain risk so that expectations can be set 3 Here’s information on your fund How risky is What does this What income this fund? mean for me? could I get?
How risky is this fund?
What does this mean for me?
How much could I receive?
What income could I get?
Increase levels of drawdown Sources: FCA Data bulletin 2018 https://www.fca.org.uk/publication/data/data-bulletin-issue-14.pdf EValue’s Pension Freedom Index https://blog.ev.uk/pensions-freedom-index-2019-drawdown-tops-the-list
Keeping the focus on the customer outcome • Is this the right step towards better guidance and financial wellbeing?
In summary
If you provide drawdown... You need to do the right thing in 172 days from now
You can check existing funds for appropriateness • Customer outcome focused • Simple and meaningful • Realistic for income • Find your competitive advantage
Explain risk • How risky is this fund? • What does it mean for me? • What income could I get? • Opportunity is to guide customers to do the right thing
Thank you Come and talk to us on our stand today Don’t forget - 172 days to go!
Refreshments & networking 10.40 – 11.10
The Money and Pensions Service UK Strategy for Financial Wellbeing Charlotte Jackson Head of Pensions Operations & Customer Protection 11 February 2020
AGENDA 1 Overview of the UK Strategy for Financial Wellbeing – launch and challenge groups 2 Future Focus: Pensions Operations, opportunities and challenges ahead 3 Working together Money and Pensions Service
Introducing the Money & Pensions Service Created by bringing together the three providers of financial guidance… … our aim is to make financial wellbeing a national priority and to bring about changes which will affect millions of lives. Money and Pensions Service Northern Ireland forum 81
UK Strategy for Financial Wellbeing 2020 — 2030
Why we exist The Money and Pensions Service is here to make significant improvements to financial wellbeing in the UK. According to the OECD, the UK is well down the G20 rankings in terms of financial wellbeing. 11.5m 9m 22m 5.3m We have been given a legal duty to coordinate a national strategy that addresses this vital issue. people have often borrow do not know what they children do not less than £100 to buy food or pay need to plan for get a meaningful in savings bills retirement financial education Money and Pensions Service UK Strategy for Financial Wellbeing 83
What is the UK Strategy for Financial Wellbeing?
Future Focus
Pensions and later life Challenges Engagement – addressing the trade offs and delays caused by living for today More choices = need for good decisions by people who are confident and able to make them Impact of behavioural bias on pensions, mortality, later life and opportunities to nudge Intuitive design of products Creating a sense of ownership and trust
Targeted Interventions In the future focus work strand we are particularly conscious that the challenges ahead are likely to be very different between the different generations and by gender. We will look at how customers are fairing, Millennials Generation x Generation x Baby boomers their ability to save for retirement, at the touchpoints when they could, should and do engage and the role MaPS plays in (Mid income) (Low income) Retirement on the (Middle income) improving outcomes in retirement. horizon Mix of DC savings 40m over indebted Likely to be in AE mater trusts Greatest exposure to Housing wealth Likely to be paying minimal paying minimal contributions DB pensions Squeezed by caring pension contributions and Least financially confident Financially resilient responsibilities have small pots Least wealthy have no savings Confused about Squeezed by caring 4/5 don’t know enough about pensions responsibilities savings to make a suitable choice Money and Pensions Service UK Strategy for Financial Wellbeing 87
What is the process and timeline to deliver the National Goals? Mobilisation and activation Delivery of the 2030 UK Goals of the UK Strategy The Momentum Phase will focus on the The two Delivery Phases will The Activation Phase will focus on recommendations from the Challenge focus on driving forward the bringing together influential Groups to prepare delivery plans for activities and initiatives set each of the UK Strategic Goals and all stakeholders in a wide range of nations. out in the delivery plans organisations and sectors. These developed during the previous organisations will bring forward phases of work recommendations that will help build bold and ambitious delivery plans This phase will also include to achieve the National Goals outlined a framework and measurement of Financial Wellbeing and a UK wide in the UK Strategy Financial Wellbeing summit to launch the delivery plans, Financial Wellbeing movement and a campaign to engage organisations outside the Challenge Group process
Collaborating across the UK Joining in Across the UK Activation If people in the UK are to enjoy better financial We are now working with leaders in: wellbeing, many different organisations need to work together towards the same goals. We are now looking at the strategy’s priority areas We are creating in detail, creating specific delivery plans, and setting delivery plans for milestones for our ten-year journey towards better financial wellbeing. each of the four nations voluntary public We plan to finish the activation stage of the strategy private by summer 2020. sector sector sector We are also looking at particular financial wellbeing issues facing women and people with mental health problems. Money and Pensions Service UK Strategy for Financial Wellbeing 89
Activation phase Launch to Summer 2020
Thank you Any questions?
Panel discussion - Decumulation options Nathan Long, Research Analyst, Pensions, Savings and Investments, Hargreaves Lansdown Dale Critchley, Policy Manager, Workplace Savings and Retirement, Aviva William Burrows , Financial Adviser, Better Retirement Steven Cameron, Public Affairs Director, Aegon UK
Lunch & networking 12.55 – 13.55
Keynote presentation – What is next for successful regulation? David Fairs, Executive Director of Regulatory Policy, Analysis and Advice, The Pensions Regulator
DB to DC Transfers - What are the legal considerations for those involved in the transfer process? - Could this be the next financial scandal? Shane O’Reilly Partner Imogen Garner Partner Norton Rose Fulbright LLP 11 February 2020
Introduction TPR DB to DC transfers and conversions guidance 2019 *FCA video “Our expectation of financial advisers when advising you on pension transfers” August 2019 96
Backdrop • Pension transfers are big business Record interest • Since Freedom & Choice in 2015 levels – £60bn in DB transfer activity – £34bn in 2018/2019 alone – 250% rise on 2017/2018 Since Freedom – 210,000 individual cases & Choice • What can trustees do to: in 2015 – Protect members Increased threat of – Protect themselves Regulatory scams evolution – Ensure compliance with their legal obligations *source FoIA request from Royal London, 2019 97
Member entitlement to a DB transfer • Statutory right under Part 4ZA of PSA 1993 (supplemented by Transfer Regulations) • Where – DB member has right to (uncrystallised) benefits – accrual has ceased – application to transfer is made more than one year before NRD PSA provides a statutory right to a CETV • Where CETV exceeds £30,000, must take appropriate independent advice • Receiving scheme must be registered (or QROPS) and can be occupational, personal or SIPP • Where statutory timeframes and conditions are met, trustees must effect transfer • Scheme rules may provide entitlements in wider situations 98
Advice requirement • Where value of ‘safeguarded’ benefits over £30,000, s48(8) of Pension Schemes Act 2015 applies – ‘appropriate independent advice’ is required – Authorised independent adviser – Relevant FSMA permissions as prescribed • Regulation 7 of Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) Regulations 2015 requires confirmation from adviser that: – Advice specific to transaction – Adviser has required authorisations and permissions – Adviser reference numbers – Member and scheme name 99
Statutory timeline Source: TPR DB to DC transfers and conversions guidance, December 2019 100
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