The Financial Services Authority (FSA) has decided to issue a consultation paper on pension term assurance (PTA), proposing that it should be sold under Insurance Conduct of Business (ICOB) rules in addition to Conduct of Business (COB) rules.
The move came after a number of key industry experts expressed concerns that current legislation hinders protection intermediaries from advising on the whole of the protection market.
PTA can currently only be sold by COB advisers. This has left protection advisers, who are regulated under ICOB rules, unable to offer their clients PTA without first altering their permissions.
If left unchanged, this could have dire effects on A-day next year when PTA is expected to become a popular protection option, as it will allow individuals to buy term assurance while at the same time enjoy tax relief on their premiums. However, changes now seem likely to occur after the FSA announced that it would consult on the matter following discussions with several intermediaries and life offices.
Confirming the regulator's decision, Abi Jones, spokesperson at the FSA, said: "The Financial Services Authority will be proposing that pension term assurance should be sold according to ICOB rules as well as COB rules.
"We decided to do this in line with the pension changes that are coming into effect in April next year in a bid to try to make the product as widely available as possible," she added.
Applauding the move, Tom Baigrie, managing director of LifeSearch, said: "It would be unthinkable that LifeSearch, which is one of the major protection intermediaries in the UK, would not have access to all protection products available in the market." The proposal was also widely welcomed by insurers.
"It is very encouraging that the Financial Services Authority has now recognised that only allowing COB regulated advisers to sell pension term assurance would exclude a large number of customers from the opportunity of potentially better value for money life cover," said Rod McKie, head of marketing at Scottish Equitable Protect.
"I expect that the consensus of views received through consultation will agree that ICOB advisers should have access to selling PTA as well. Obviously we will be looking at the outcome with interest as we would intend to offer a pension term assurance protection solution whatever the decision," he added.
Only a handful of insurers are currently offering PTA, however many providers are expected to launch into this market if the FSA goes ahead with the proposals.
The FSA will be publishing the consultation paper in October and expects the consultation to take around two months, with the rules ready to be implemented on A-day. "We hope the new rules will be in place by April next year. However, it depends on the issues that may surface during the consultation," added Jones.
