Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

COBS 16.6 2Communications to clients – life insurance, long term care insurance and drawdown pensions

Disclosure for life insurance contracts: information to be provided during the term of the contract

COBS 16.6.1RRP
3
  1. (1)

    This section applies to a long-term insurer, unless, at the time of application, the client, other than an EEA ECA recipient, was habitually resident outside the United Kingdom and he was not present in the United Kingdom7.

    3
  2. (2)

    In addition, COBS 16.6.8 R applies to an operator of a personal pension scheme or stakeholder pension scheme in relation to a retail client who elects to make income withdrawals.

    3
COBS 16.6.2RRP
4
  1. (1)

    The policyholder must be informed if during the term of a life policy entered into on or after 1 July 1994 there is any change in the following information:4

    1. (a)

      the policy conditions;4

    2. (b)

      the name of the insurer, its legal form or the address of its head office and, where appropriate, of the agency or branch which concluded the contract; and4

    3. (c)

      the information in (8) to (13) of COBS 13 Annex 1 (The Solvency II Directive information) in the event of a change in the policy conditions or amendment of the law applicable to the contract.4

  2. (2)

    A notification in (1) must be made: 4

    1. (a)

      in a clear and accurate manner and in writing; and4

    2. (b)

      in an official language of the State of commitment or in another language if the policyholder so requests and the law of the State of commitment so permits or the policyholder is free to choose the law applicable.4

[Note: article 185(5) and (6) of the Solvency II Directive4]

4
COBS 16.6.3RRP

If a life policy entered into on or after 1 July 1994 provides for the payment of bonuses and the amounts of bonuses are unspecified, the long-term insurer must, in every calendar year except the first, either:

  1. (1)

    notify the policyholder in writing of the amount of any bonus which has become payable under the contract, and which has not previously been notified under this rule; or

  2. (2)

    give the policyholder in writing sufficient information to enable him to determine the amount of any such bonus.

[Note: in respect of (1), article 185(5) of the Solvency II Directive]4

COBS 16.6.3ARRP

4If a firm provides figures, on or after 1 January 2016, about the potential future development of bonuses under a with-profits policy it must inform the policyholder annually in writing of any differences between the actual bonuses payable to date and the figures previously provided.

[Note: article 185(5) of the Solvency II Directive]

COBS 16.6.4RRP
  1. (1)

    When a firm provides information in accordance with this section, it must provide the information in a durable medium, unless (2) applies.

  2. (2)

    If the contract is being made by telephone, the firm may give the information orally to the customer. If the customer enters into the contract, a written version of the required information must be sent to the customer within five business days of the contract being entered into.

COBS 16.6.5RRP

Where a life policy is effected jointly, the information required by this section may be sent to the first named client.

COBS 16.6.6RRP

A firm must make an adequate record of information provided to a customer under this section and retain that record for a minimum period after the information is provided of five years.

Long term care insurance

COBS 16.6.7RRP

1At each anniversary of the date on which a long-term care insurance contract which is based on single premium investment bonds was entered into, the insurer must:

  1. (1)

    provide the retail client with a table based on the format of COBS 13 Annex 3 2.2R containing at least the current fund value and projected future policy values (as in column "What you might get back");

  2. (2)

    where it is the case, inform the retail client of the possibility that future policy values may be insufficient to fulfil the original purpose of the contract; and

  3. (3)

    inform the retail client how to obtain advice on investments in respect of long-term care insurance contracts, and that it is in his best interest to do so.

Drawdown pensions: annual statements

COBS 16.6.7AR

910In the rest of COBS 16.6:

  1. (1)

    “annual statement” is the information required to be provided to a retail client on an annual basis at COBS 16.6.8R;

  2. (2)

    “cash terms” means pounds and pence;

  3. (3)

    “cash-like investments” includes cash or near cash, units in a regulated money market fund, or units in a fund authorised as a money market fund for the purposes of the UK version11 of the European Parliament and Council Regulation on money market funds (2017/1131/EU), which is part of UK law by virtue of the EUWA11; and

  4. (4)

    “drawdown fund” means either a capped drawdown pension fund or flexi-access drawdown pension fund;

  5. (5)

    a retail client is a “non-advised retail client” if a firm has not determined on reasonable grounds that the client has received a personal recommendation in relation to how to invest the sums or assets in their drawdown fund, in accordance with COBS 19.10.10R (4);

Income withdrawals - annual statements

COBS 16.6.8RRP

1At intervals of910 no longer than 12 months, beginning on910 the date a retail client first910 takes a pension commencement lump sum or an uncrystallised funds pension lump sum payment, or first makes an income withdrawal910, the relevant operator of a personal pension scheme or stakeholder pension scheme 3must:

563
  1. (1)

    provide the retail client with such information as is necessary for3 the retail client to review the decision8, including where relevant the information required by COBS 13 Annex 2 2.9R (Additional requirements: drawdown pensions and regular uncrystallised funds pension lump sum payment), COBS 16.6.8AR (pathway investments) and COBS 16.6.10R (costs and charges disclosure)910; and

    33
  2. (2)

    inform the retail client that if their circumstances or retirement objectives have changed it may be in their best interests to:8

    6666
    1. (a)

      review their choice of pension product; 8

    2. (b)

      review their investment choices; 8

    3. (c)

      take regulated advice to understand their options at retirement; and8

    4. (d)

      seek out guidance. 8

COBS 16.6.8AR

910If a retail client is invested in a pathway investment the annual statement must include the following:

  1. (1)

    a short description of each pathway investment the retail client is invested in, including the corresponding investment pathway option under COBS 19.10.17R(1) and the current value of each pathway investment in cash terms;

  2. (2)

    (for those retail clients invested in two or more pathway investments) how the retail client’s drawdown fund is split, in cash terms, across the different pathway investments and the corresponding investment pathway options;

  3. (3)

    a short description of the investment pathway options the retail client is not currently invested in (COBS 19.10.17R(1));

  4. (4)

    a statement reminding the retail client that they can, at any time:

    1. (a)

      select a different investment pathway option and change their pathway investment;

    2. (b)

      select an investment that is not a pathway investment;

    3. (c)

      (where this option is available) split their drawdown fund across two or more pathway investments;

    4. (d)

      choose a different product to access their pension savings;

    5. (e)

      shop around, with an explanation of how they may do so.

COBS 16.6.8BG

910If a retail client has been invested in the same pathway investment for 5 years (or a multiple of 5 years) a firm should consider including in the retail client’s next annual statement:

  1. (1)

    a reminder of the number of years the retail client has been invested in the same pathway investment; and

  2. (2)

    a statement that the retail client should review the investment pathway option.

COBS 16.6.9GRP

5The information provided to the retail client in COBS 16.6.8R(1) is likely to be sufficient for the client to review the decision8 if it contains at least one of the following (in addition to the information required by COBS 16.6.8AR and COBS 16.6.10R, as relevant)910:

  1. (1)

    the information required by COBS 13 Annex 2 2.9R (Additional requirements: drawdown pensions and regular uncrystallised funds pension lump sum payments); or

  2. (2)

    the effect of any significant one-off withdrawals or payments since the previous information was provided; or

  3. (3)

    (where regular income is being taken) information about the sustainability of the client’s income over time, which may refer to:

    1. (a)

      the proportion of the fund remaining since outset; or

    2. (b)

      an indication of when the fund may cease to exist; or

    3. (c)

      the rate of withdrawals or payments relative to a sustainable rate; or8

  4. (4)

    (if a client has only taken a pension commencement lump sum) information about their investment, fund choices, fund value and charges. 8

Personal or stakeholder pension schemes in decumulation: actual costs and charges disclosure

COBS 16.6.10R
  1. (1)

    910The annual statement must include costs and charges information which must be:

    1. (a)

      based on actual costs and charges (including transaction costs and the cost of advice) charged by the operator or other parties, which have been paid out of the retail client’s:

      1. (i)

        drawdown fund; or

      2. (ii)

        personal pension scheme or stakeholder pension scheme from which an uncrystallised funds pension lump sum payment was paid;

    2. (b)

      aggregated and totalled; and

    3. (c)

      expressed in pounds and pence.

  2. (2)

    When a retail client’s personal pension scheme or stakeholder pension scheme is in partial drawdown, the operator:

    1. (a)

      may include costs and charges information for the whole pension scheme; and

    2. (b)

      must make clear whether the costs and charges information relates to the whole pension scheme or only to the drawdown fund.

  3. (3)

    If the operator does not have the information necessary to comply with (1), it must take all reasonable steps to obtain it.

  4. (4)

    If the operator does not have exact figures for certain costs and charges, despite taking all reasonable steps to obtain them, the operator:

    1. (a)

      must provide a reasonable estimate of such costs and charges when providing the costs and charges information; or

    2. (b)

      if it is not possible to provide a reasonable estimate of such costs and charges, must include a written statement, with the costs and charges information, to explain which costs and charges are not included.

  5. (5)

    The operator must include a written statement with the costs and charges information, stating whether any adviser remuneration, including adviser charges, consultancy charges, commission or commission equivalent, is included in the aggregated costs and charges figure.

  6. (6)

    The operator must make clear what period is covered by the costs and charges information.

COBS 16.6.11R

910COBS 16.6.10R does not apply where costs and charges are discharged by payment of the fixed price of a drawdown pension product, which has been clearly disclosed to the retail client.

COBS 16.6.12G

910Where COBS 16.6.10R(1)(a)(ii) applies, the annual statement must include costs and charges for the whole of the retail client’s personal pension scheme or stakeholder pension scheme.

COBS 16.6.13G

910The operator’s reasonable steps to obtain costs or charges information should include, where relevant, requesting this information from third parties that provide services relating to the retail client’s drawdown fund, personal pension scheme or stakeholder pension scheme.