The rules will be introduced on a temporary basis, and without consultation, on 6 April 2015. A spokesperson for the FCA has commented: “We consider that the delay involved in consulting would probably be prejudicial to consumers”. He added that once the additional questions had been asked, individuals would then be able to proceed with accessing their cash.
Meanwhile fears are growing about an explosion in the number of scams targeting savers cashing in on their pension pots. Research by pension company Phoenix Group found that 45% of pension savers have been approached to see if they wanted to review their pension or release some of it as cash.
Could the new rules open the floodgates to scams, mis-selling and poor advice?
Also, the price of the freedom to spend one's pension pot may be the invasion of privacy; however, it appears that under the new rules there is a requirement on pension providers to ask those questions, but no obligation on pension savers to provide answers before they are able to access their cash.
The financial regulator is rushing in new rules aimed at protecting people keen to cash in their pension pots from making bad decisions that could cost them dearly later on. Under the new regime outlined by the Financial Conduct Authority (FCA), pension providers will be required to question older people about their personal circumstances including health, “lifestyle choices”, and marital status– and issue them with “risk warnings” before releasing their cash. From 6 April, any requirement to convert a pension pot into an annuity will be abolished, leaving people free to do what they like with their retirement cash. More than 300,000 individuals a year with defined contribution (or “money purchase”) pension savings will be able to access them as they wish after the age of 55.