On 1 November we will see the first big changes come into force as a direct result of the Retirement Outcomes Review (ROR) – the FCA’s big piece of work on the post-pension freedoms world. Although the ROR focuses primarily on non-advised clients there are knock-on effects that will be felt by all clients, and their advisers too.
These first changes are to wake up packs, both in the content and frequency. As well as a single page summary document, the wake up pack will also include a single page of risk warnings.

Under current rules clients get wake up packs four months and six weeks before the intended retirement date – which is itself often an arbitrary date for personal pensions. Going forward packs will be received much earlier – within two months of turning 50, then again before turning 55, at five yearly intervals thereafter until fully crystallised, and at other trigger events such as requesting benefits or illustrations. That could be a lot of wake-ups.

The idea of issuing wake up packs earlier is to ensure clients have the information, and risk warnings, before any decisions are made. The reminders are to keep the information and those warnings relatively fresh.

Clearly, for an advised client who sees their adviser on an at least annual basis these documents will be largely unnecessary – but the provider is obliged to send them regardless.

It’s worth noting that when a client requests to access benefits more than seven months before their retirement date there is a requirement for a specific warning that accessing benefits may not be the best option. This still applies even when the client is advised.

While the rules are well intentioned not giving the provider the option of taking into account whether advice has been provided does produce some “interesting” situations.

For most personal pensions where the client hasn’t specified a retirement date the default is likely to be 65. When they make a request to access their pension the provider must tell them that it may not be the best option if it is more than seven months prior to their intended retirement date – so in many cases any client younger than 64 and 5 months. This is true even when the request has come via a financial adviser who has stated on the application that they have given a personal recommendation in relation to the request.

Clearly the adviser will have far more information than the provider to know whether accessing benefits is in the client’s interest, and the fact that a positive recommendation has been made is itself evidence that it is the case. However the provider has no discretion in the matter.
If the intended retirement date is later - and it could be anything up to age 75 - then these scenarios will be even more frequent.

The end result could be a more confused client, more explaining for the adviser and a provider whose hands are tied.

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Lisa Webster is senior technical consultant at AJ Bell