UFPLS & Critical Yields etc
edevan5
Member
Quick question for y'all...
When recommending UFPLS, would you expect to see details of the annuity that could have been bought with the crystallised fund / Critical Yield A etc in the suitability report?
When recommending UFPLS, would you expect to see details of the annuity that could have been bought with the crystallised fund / Critical Yield A etc in the suitability report?
Comments
I was under the impression CY A is a requirement but hopefully i'm wrong.
A statement articulating the sustainability of the strategy is much more useful.
http://www.fsa.gov.uk/pubs/additional/regup55.pdf
As far as I am aware, there has never been a regulatory requirement to produce a critical yield type A or type B for a drawdown plan. There certainly isn't one as I type this (although the current guidance above is considered by some to remain a 'best practice').
The current rules on illustrations are available in COBS 13 Annex 2, with additional requirements for drawdown and regular UFPLS at 2.9.
The rules on Suitability for income withdrawals are in COBS 9.4.10
The guidance in RU55 was written at a time when there was compulsory annuitisation of a PFW at age 75. As such, it had a genuine value to the client who was, effectively, deferring annuity purchase with a PFW.
My personal opinion is that since April 2015 the need for critical yields on any unsecured pension income option is only a factor for clients with a future intention to annuitise the fund. Nothing in COBS makes an argument against that position.