Presenter: Alison Smith

Title: Compliance Update March 2009

1. Pension Switching / Consolidation Review

2. Collective Responsibility (Apportionment & Oversight)

3. Professional Indemnity Insurance (PII)

Agenda

Background to the Review

1. FSA “Gleneagles Speech” (Sept’06)

2. Retail Distribution Review (RDR)

3. Quality of Advice Pension Switching (Dec’08)

Scope of FSA’s Review

1. 30 firms visited (Autumn’08)

2. 500 cases reviewed (approx. 10% of Pension Switching cases since A Day)

3. Review of providers & product literature

High Level Findings

1. 16% of cases - “unsuitable”

2. 25% of firms - more than one third of cases “unsuitable”

3. 7% of cases - “inadequate records”

4. Lack of compliance review & MI

Key Areas of Concern

1. Unnecessary Additional Costs (79%)

2. Not meeting Client’s Attitude to Risk (40%)

3. Need for ongoing review (26%)

4. Loss of benefits from ceding scheme (14%)

Most files were unsuitable for more than one reason

Examples of ConcernsAdditional Costs

1. Investment flexibility not required / used

2. Improved performance not demonstrated

3. Stakeholder could have met client needs

4. Cost of consolidation not explained / justified

Examples of ConcernsNot Matching Client’s Attitude To Risk.

1. Fund too risky / too cautious

2. Term to retirement not considered > influence asset allocation

3. Fund not diversified “all your eggs in one basket”

Examples of Concerns

Ongoing Reviews & Loss of Benefits

1. Lack of Regular Reviews to maintain asset allocation to meet clients changing ATR

2. Loss of Benefits from ceding scheme:1. Guaranteed Annuity Rates (GARs)

2. Guaranteed Basic Annuity

3. Basic sum assured

4. Guaranteed Growth Rates

5. Guaranteed Death Benefits

Pension Switching - Timescales

Dec’08 Feb’09 March –

June 09

Q3 2009 onwards

FSA written to 4,500 firms

Pension Switching

Roadshows

Firms conduct review

FSA Assess Firms

Action Required By FSA

1. Consider your approach to past pension sales2. Take appropriate remedial action if failing identified3. Consider if you need to change your approach4. Does your MI tell you if you are delivering fair

outcomes to your clients?

How to Undertake the Review

1. Project Plan

2. Inform your PI Insurer3. Assess systems & controls

4. Identify population

5. Check % of cases (use FSA template)

6. Remedial action

Key Documents

1. FSA’s Pension Switching Paper (Dec 08)

2. FSA’s client file review template

3. Compliance Bulletins B171 & B173

4. Bankhall guide to Pension Switching

5. Bankhall’s Personal Pension Transfers / Redirection of Contributions Suitability Report Checklist (Appendix 1 Chapter 3A)

Pension Switching - Questions

How worried are you about the pension switching review?

Press 1 if you are very worried

Press 2 if you are moderately worried

Press 3 if you are not worried at all

Please vote now

Pension Switching Question

Would you like Bankhall to run a workshop on how to conduct the Pension Switching Review?

Press 1: If you would like Bankhall to run a Pension Switching workshop

Press 2: If you do not think you would benefit from Bankhall running a Pension Switching workshop

Please vote now

Collective Responsibility - SYSC (Systems & Control Source Book)

1. W/E/F 1st April 2009 CF8 (Apportionment & Oversight Officer) ceases

2. Common Platform extended to most firms

3. All Directors / Partners have equal responsibility for Apportionment & Oversight

Changes to Professional Indemnity Insurance (PII)

Firms who are subject to the Insurance Mediation Directive (IMD), are subject to new PII limits:

Single Claim = Euros1,120,200 (approx £1M)Aggregate = Euros1,680,300 (approx £1.5M)

Policies entered into prior to

28th February 2009 are valid until renewed or extended

First City – Bankhall’s PII Offering

Compliance Update

Questions?

Lunch is Served - Enjoy