It is 2021 and, although the lockdown might give readers a sense of deja vu, there are some changes to our world arising from the end of the BREXIT transition period and a couple of imminent new rules. This brief article aims to draw these to your attention.

If you want any further information, you can read our previous articles where available and/or speak with us if you want to discuss any issues arising.

Consumer protection
Now that we are no longer a part of the EU, advisers should take care to understand what protection applies to recommended investment products or funds that are not UK based. FSCS protection no longer applies. Read more here.

Data Protection
Despite the GDPR coming from the EU and the UK having implemented it in the shape of the Data Protection Act 2018, there is no ‘adequacy agreement’ in place to the effect that the EU recognises the DPA 2018 as ‘equivalent’. It is believed that discussions are taking place, but in the meantime, firms need to ensure that appropriate safeguards/processes are in place if any data or shared or processed in the EU. Further information can be found on the ICO website.

Passporting
Passporting has ceased to be an option for advisers with clients in the EEA. Unless and until a future agreement with the EU is reached on financial services, firms with clients in the EEA will need to do one of the following:

• make arrangements directly with the relevant financial regulator where the client resides;
• deal with the client ONLY when the client is in the UK;
• stop advising the client.

Aggregated costs disclosure
Currently, there is no need to include a client’s pension plans in any aggregated costs statements, although we are aware that many firms choose to do so anyway, for the sake of completeness.

From 1 February 2021, the new COBS 16.6.10R applies, in relation to personal pension schemes or stakeholder pension schemes in decumulation. This introduces a positive requirement for firms to disclose actual costs and charges paid out of the pension fund/scheme in decumulation (e.g. drawdown); and state whether adviser charges (including commission etc.) is included in the aggregated figure.

Investment Pathways
Also from 1 February 2021, pension providers must offer ‘investment pathways’ to non-advised drawdown customers who move all or part of their pension savings into drawdown or transfer money already in drawdown to a new drawdown plan.

They must also be offered the choice to stay invested in their current investments (if available) or choose their own investments.

Customers who choose the investment pathways will be presented with four options and asked to choose the one that most closely matches their retirement goals:

• Option 1
  I have no plans to touch my money in the next 5 years.
• Option 2
  I plan to use my money to set up a guaranteed income (annuity) within the next 5 years.
• Option 3
  I plan to start taking my money as a long-term income within the next 5 years.
• Option 4
  I plan to take out all my money within the next 5 years.

Once an option is selected, the customer will be offered an appropriate investment pathway solution.

The FCA is introducing a new drawdown comparison tool to allow non-advised drawdown customers to compare drawdown products and investment pathways.

What does this mean for advisers?
Advisers recommending an investment solution for drawdown clients, should also consider investment pathways and whether or not they’ll better meet the clients’ needs. Whether or not an investment pathway is used, firms should ensure their investment process documents their consideration and in turn that suitable outcomes are always achieved for the client.