Title: Inverstors mis-sold pension products

Author: Steve Lewis

Added on: 13/10/2009

The Financial Times led the money section of the weekend paper on October the 3rd with this headline. It always brings a shiver to my bones when I read such headlines, and we must take heed of this warning. I would like to bring this to your attention as the issues raised are important. The article arises from a rise in complaints to the Financial Ombudsman Service, and they quote that 83 complaints have been received so far this year.

Some 18 months ago I wrote our paper - De-risking Drawdown, which highlights some of the issues in the drawdown market, and the importance of conducting a thorough review in the coming twelve months.  (This is still available on our web site.)  I also believe that it is very important to have established a clear, and agreed, exit strategy with the client. We will be reviewing this paper as a result of the FT article and the news from the Ombudsman.

If you have any number of Income Drawdown clients our advice is simply to ensure that over the coming twelve months to establish a robust review programme for all clients, ensuring a face to face meeting takes place and the client is fully aware of the reasons to be in drawdown; the risks involved; and the planned exit strategy. If you would like support in this work please contact us. We are currently seeking to work with a product provider to provide a sample review process for advisers.

Clients in drawdown may be pleased to be informed of new product solutions that may have been launched since their entry into the contract. Flexible Annuity; Scheme Pension; as well as ASP can offer good alternatives to Income Drawdown for the client. Advisers will appreciate the duty placed upon them through the original PIA regulations and the more up to date COB rules, to be aware of changes in the market and to keep the client informed.

In a market where investors are aware of their rights to complain, professional advisers should be all the more aware of the state of their higher risk business, including their Income Drawdown business. None of us I am sure want to see headlines such as these, and we are committed to working with advisers to help them understand the retirement market. The article continues, perhaps more positively, and discusses why these contracts have become popular. You can review the article on the FT.com web site by searching the above headline.

If you have any views, or would like to explore how we can support you please simply reply to this Bulletin email.

Steve Lewis