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FSA/PN/102/2006
17 October 2006

The Financial Services Authority (FSA) today publicly censured GD Tancred Financial Services Limited (GDT) for not clearly explaining and documenting the risks of income withdrawal to customers with small pension pots (less than £100,000).

Income withdrawal allows people to take a tax-free lump sum from their pension pot and receive an income from the rest. This is a high risk business, as people could end up with less income than expected in retirement, the impact of which is greater for those with small pension pots. Income withdrawal is only suitable for a limited number of people.

In addition to the censure, GDT has agreed to vary its permission so that any new income withdrawal business must be signed off by a suitably qualified independent person. GDT is also writing to all of its income withdrawal customers to make them aware of the risks of the product and offering them a review of their circumstances.

GDT's failings were discovered during the FSA's 'thematic' work into how small firms give income withdrawal advice. As part of this review, the FSA has asked firms visited to take remedial action and issued one firm with a private warning. The FSA has also given feedback to other small firms in this market based on the findings of the thematic work. It requires them to review their practices to ensure they meet the regulatory standard and treat customers fairly.

Jonathan Fischel, FSA Head of Investments, Small Firms Division said:

"It is ultimately the firm's responsibility to inform customers of the risks of financial products like income withdrawal. Providing consumers with information that is clear, fair and not misleading is a key element of treating customers fairly.

"Our recent work in this area showed that firms need to do more to ensure that they get it right. In light of this, firms should review their business and make sure that sufficient controls are in place to demonstrate the suitability of any recommendations."

In determining what action to take, the FSA considered the current financial position of GDT, the future costs to the firm of varying its permission and its remedial work with customers. A public censure is one of the regulatory actions the FSA can take when a firm breaches its rules and principles.

Notes for editors

1. The full text of the Final Notice which includes the background to the case, the relevant statutory provisions, and the regulatory requirements contravened can be found on the FSA website.
2. Frequently asked questions on income withdrawal for financial advisers are available on the FSA website.
3. Consumer factsheets and other general information on income withdrawal and pensions are also available from the FSA pensions website.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.