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Regulatory change to look out for in 2019


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Published: 04/04/2019

Dina Masters-Raval, GBST Regulatory Lead – Retail Wealth, highlights the regulatory changes coming this year in the UK wealth management sector.

  • Major review of pensions freedom progress kicked off the year
  • Auto enrolment and dashboards to shake things up
  • Focus on advice and guidance
  • HMRC online digital overhaul continues

The pensions space is complex, with ever-evolving consultations, policy and legislation keeping us all busy. The range of regulatory updates due in 2019 provide no let-up in both the scope and quantity of change in the space. Here’s a summary of what to expect!

Starting as we mean to go on

The programme of change started early in the year, with the new amalgamated Single Financial Guidance Body (SFGB) helping consumers from 1st January. In its footsteps was the Work and Pensions Committee inquiry into ‘Contingent Charging’” for Defined Benefit (DB) transfers. This looked into the practice of only charging if the transfer proceeds, which many believe increases the risk of inappropriate transfers being made. Changes here may impact demand for DB transfers.

After almost four years with pension freedoms, the market is beginning to stabilise and the Financial Conduct Authority (FCA) have now released their latest updates on the Retirement Outcomes Review. This confirms that non-advised members will need to be offered ‘Investment Pathways’ (alongside the providers full fund range) to ensure they remain appropriately invested once they start to draw on their pension savings.

The FCA believe that these pathway funds will help avoid poor decisions being made by consumers e.g. defaulting their post retirement funds to cash and/or drawing lump sums without considering ongoing investment needs to support their income in retirement. Investment Pathways are still subject to further consultation and we expect them to be required from summer 2020.

Change ahead for workplace pensions

There are some significant legislative changes on the horizon in the Workplace Market. Opt out rates may be impacted as mandatory auto enrolment contributions increase to a total of 8% of qualifying earnings from April 2019. For member contributions this is an increase of up to 5% (including tax relief) from the previous 3% limit.

One of the major beneficiaries of automatic enrolment has been the renaissance of the Master Trust. Faced with new Capital Adequacy requirements and the need to seek authorisation by the Pension Regulator by 31st March, it will be interesting to see what the market looks like as we progress through 2019. Expect a number of market exits and heightened M&A activity.

Given the plethora of pensions we collect during our working lives (the Department of Work & Pensions estimate an average of 11), it will be great to see the first Pension Dashboard hopefully make an appearance this year. Giving a one stop shop to view all pensions in the same place, the first dashboard to market will be a not for profit version hosted by the Single Financial Guidance Body (SFGB). The latest round of consultation on the Dashboard finished at the end of January and we await further guidance from the DWP on this over the coming months.

Also on the horizon

With the phased introduction of increased State Pension Age continuing through 2019 until October 2020, clients may find their state pension takes longer to receive.

HMRC’s online digital overhaul continues, with phase 2 pensions online digital service specifications expected to make an appearance in Q2 2019.

Of course, we also have the small matter of Brexit (or do we?) and the FCA’s final Investment Platforms Study report both due during Q1 2019.

It looks like we’re all going to have a lot to contend with in 2019, and looking to the early months of 2020, the FCA’s latest update to their Financial Advice Market Review will be upon us. This will review the measures it implemented in 2016, seeking to ensure advice and guidance is affordable and accessible.

What’s on your regulatory agenda in 2019? Please get in touch if there is anything you would like to discuss.

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