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COBS 19.4 Open market options

Definitions3

COBS 19.4.1RRP

In this section:

  1. (1)

    ‘intended retirement date’ means:

    1. (a)

      the date (according to the most recent recorded information available to the provider) when the scheme member intends to retire, or to bring the benefits in the scheme into payment, whichever is the earlier; or

    2. (b)

      if there is no such date, the scheme member's state pension age;

  2. (2)

    ‘open market options' means the options available to a scheme member3 to use the proceeds of a personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract on the open market; and

    33
  3. (3)

    'open market options statement' means the information specified in COBS 19.4.1A R which is provided in a durable medium to assist the retail client to make an informed decision about their open market options.3

    3

Contents of open market options statement

COBS 19.4.1AR

3An open market options statement must include:

  1. (1)

    the fact sheet "Your pension: it’s time to choose" available on www.moneyadviceservice.org.uk or a statement that gives materially the same information;

  2. (2)

    a summary of the retail client's open market options, which is sufficient for the client to be able to make an informed decision about whether to exercise, or to decline to exercise, open market options;

  3. (3)

    information about the retail client's personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract provided by the firm, including:

    1. (a)

      the sum of money that will be available to exercise open market options;

    2. (b)

      whether any guarantees apply and, if so, information about how the guarantees work;

    3. (c)

      any other relevant special features, restrictions, or conditions that apply, such as (for with-profits funds) any market value reduction conditions in place; and

    4. (d)

      any other information relevant to the exercise of the retail client's open market options; and

  4. (4)

    a clear and prominent statement about the availability of the pensions guidance including:

    1. (a)

      how to access the pensions guidance and its contact details;

    2. (b)

      that the pensions guidance can be accessed on the internet, telephone, or face to face;

    3. (c)

      that the pensions guidance is a free impartial service to help consumers to understand their options at retirement; and

    4. (d)

      a recommendation that the client seeks appropriate guidance or advice to understand their options at retirement.

When to send open market options statement and six-week reminder 3

COBS 19.4.2RRP
  1. (1)

    If a retail client asks a firm for a retirement quotation more than four months before the client’s intended retirement date, the firm must give the client an open market options3 statement with or as part of its reply, unless the firm has given the client such a statement in the last 12 months.

    3
  2. (2)

    If a firm does not receive such a request, it must provide a retail client with an open market options3 statement between four and six months before the client’s intended retirement date.

    3
COBS 19.4.3RRP

The firm must:

  1. (1)

    remind the retail client about the open market options statement;3

    3
  2. (2)

    tell the client what sum of money will be available to exercise open market options;3

    3
  3. (3)

    remind the client about the availability of the pensions guidance; and3

  4. (4)

    make a recommendation that the client seeks appropriate guidance or advice to understand their options at retirement;3

at least six weeks before the client’s intended retirement date.

COBS 19.4.4RRP

If a retail client with an open market options3 tells a firm that he is considering, or has decided:

3
  1. (1)

    to discontinue an income withdrawal arrangement; or

  2. (2)

    to take a further sum of money from his pension to exercise open market options;3

    3

the firm must give the client an open market options3 statement, unless the firm has given the client such a statement in the last 12 months.

3

Signposting pensions guidance

COBS 19.4.5RRP
  1. (1)

    3Where a firm communicates with a retail client about the retail client's personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract which is provided by the firm, unless the circumstances in (2) apply, the firm must3:

    1. (a)

      refer to the availability of the pensions guidance;3

    2. (b)

      offer to provide the client with information about how to access the pensions guidance; and3

    3. (c)

      [deleted]3

    4. (d)

      include3 a recommendation that the client seeks appropriate guidance or advice to understand their options at retirement.

  2. (2)

    A firm is not required to provide the client with the statement required in (1) where:

    1. (a)

      the firm communicates with the client for a purpose other than:

      1. (i)

        encouraging the client to think about their open market options3; or

      2. (ii)

        facilitating access to the proceeds of the client’s personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract; or

    2. (b)

      the client has already accessed the pensions guidance; or3

    3. (c)

      the client has already received advice from a firm on their open market options, for example from an independent financial adviser; or3

    4. (d)

      the firm is providing the client with an open market options statement or six-week reminder in accordance with COBS 19.4.2R, COBS 19.4.3R or COBS 19.4.4R.3

COBS 19.4.6GRP

3An example of behaviour that is likely to contravene the client's best interests rule or Principle 6 and may contravene other Principles is for a firm to actively discourage a retail client from using the pensions guidance, for example by:

  1. (1)

    leading the client to believe that using the pensions guidance is unnecessary or would not be beneficial; or

  2. (2)

    obscuring the statement about the availability of the pensions guidance or any other information relevant to the exercise of open market options.

Tax implications

COBS 19.4.7RRP

3If a firm receives an application from a retail client to access some or all of the proceeds of a personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract, the firm must provide the client with a description of the tax implications before the client accesses those proceeds.

COBS 19.4.8RRP

3A firm is not required to provide the information specified in COBS 19.4.7 R where it is provided in accordance with COBS 14.2.1 R.