Money News
City watchdog, the FSA (Financial Services Authority), has publicly censured financial adviser GD Tancred Financial Services Limited (GDT) for not clearly explaining and documenting the risks of income withdrawal to customers with small pension pots (less than £100,000).
Income withdrawal allows people to take a tax-free lump sum from their pension pot and receive an income from the rest. This is a high risk business, as people could end up with less income than expected in retirement, the impact of which is greater for those with small pension pots. Hence, income withdrawal is only suitable for a limited number of people.
In addition to the censure, GDT has agreed to vary its permission so that any new income withdrawal business must be signed off by a suitably qualified independent person. GDT is also writing to all of its income withdrawal customers to make them aware of the risks of the product and offering them a review of their circumstances.
GDT's failings were discovered during the FSA's 'thematic' work into how small firms give income withdrawal advice. As part of this review, the FSA has asked firms visited to take remedial action and issued one firm with a private warning.
The FSA has also given feedback to other small firms in this market based on the findings of the thematic work. It requires them to review their practices to ensure they meet the regulatory standard and treat customers fairly.
Jonathan Fischel, FSA Head of Investments, Small Firms Division said that it's ultimately the firm's responsibility to inform customers of the risks of financial products like income withdrawal. Providing consumers with information that is clear, fair and not misleading is a key element of treating customers fairly. Self evidently, GD Tancred Financial Services wasn't 'on message'.
18 October 2006 © Moneyextra.com
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