MiFID II aims to reinforce investor protection standards and although the Directive and other related EU regulations currently keep pensions out of scope, the FCA has sought industry views on applying equivalent rules to pensions for consistency.
Steven Cameron, Regulatory Strategy Director at Aegon said:
“The FCA has very helpfully differentiated the actions it’s required to take to implement MiFID II and where it has a choice to make about extending the Directive to include other products, in particular pensions and insurance based investment products.
“The UK pensions market has some very distinctive features and unique consumer protection measures from automatic enrolment to charge caps to Pensions Wise. The FCA is considering further domestic changes with a review of pension regulation due to start this summer and the ongoing development of transaction cost disclosure.
“In view of the existing safeguards, we see no reason for the FCA to ‘gold plate’ rules around allowing individuals to purchase pensions without advice, particularly with an in / out EU referendum looming. In our opinion, consumers don’t need more layers of regulation, even if that means we don’t have full consistency between MiFID and non-MiFID products.
“We would be particularly concerned if the FCA applied the concept of complex products to pensions. This could mean consumers might not be able to join certain pension schemes or invest in certain funds deemed complex unless they received advice or had been through an appropriateness test to assess their knowledge and understanding. This could create huge problems if any default funds used for auto-enrolment were classed as complex, perhaps because their investments allowed the use of derivatives.
“We’re pleased the FCA has already ruled out reflecting EU rules around disclosure to pensions at this stage. Here, the key should be designing relevant communications which encourage UK savers to engage with their retirement planning.”
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