Industry regulator, the Financial Services Authority (FSA), is to get rid of the RU64 rule, which governs personal pension advice, because they are concerned that it is narrowing the market.
The regulator has released a consultation paper, which proposes bringing the standards governing the sale of personal pensions into line with all other packaged products. The RU64 rule was introduced six years ago to protect consumers in the run up to the introduction of stakeholder pensions. It requires advisers recommending personal pensions to explain in writing to their client why the pension is at least as suitable as a stakeholder pension.
Its aim was to stop advisers locking clients into high-charging, inflexible pensions before the implementation of the governments' price-capped stakeholder scheme.
Our view
This is a difficult call. The RU64 rules means that when obtaining pensions advice, your financial adviser must justify giving you a policy with higher charges than the newer low cost stakeholder pension schemes. Higher charged schemes tend to offer more features but also they pay much higher commissions!
In practice many advisers have moved away from the regular premiums pensions market or are charging fees for advice. This has resulted in a steady decline in savings overall by UK residents.
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