4.1 The current exemption in Article 72 of the Financial Promotion Order applies only to employers (although there is no restriction on which employer representatives may make workplace promotions, e.g. senior managers, human resource specialists).
This is because the exemption aims to tap into the trust which exists between employer and employee, which in turn relates to employers’ general duties of care towards their employees – and it is reasonable to consider that these duties may extend to employers helping their employees make sound decisions about work-related financial matters.
4.2 Many companies outsource the administration of their pension schemes, however, and would usually turn to staff from the outsourced company to provide information about the pension. Indeed these people, rather than the employers themselves, may in some circumstances be the only people who are knowledgeable and competent to provide detailed information and advice sought by employees.
4.3 It seems reasonable that where an employer has entrusted the administration of their company pension scheme to a third party, and is content for that third party to act on their behalf for the purpose of issuing workplace promotions, then the exemption under Article 72 of the Financial Promotion Order should also apply to that third party.
4.4 We suggest, therefore, that the exemption should be extended to persons who have entered into a contract with the employer to provide services in relation to the group personal or stakeholder pension scheme, such as administration services.
Safeguards for employees
4.5 Any extension to third parties would need to be accompanied by appropriate safeguards. Safeguards similar to those which currently relate to promotions made by employers would apply, i.e. the employer would need to make a financial contribution to the pension and disclose its size, the employer could not gain a direct financial benefit from the promotion, and written material would need to inform employees of their right to seek financial advice from a person authorised by the FSA or from an appointed representative. These conditions are set out in Article 72(2) of the Financial Promotion Order.
4.6 In addition we suggest that; (i) the employer should be satisfied that the third party is knowledgeable and competent to make the promotions, and that; (ii) the third party should explain to each employee the size of any direct financial benefit that the third party will receive as a result of that employee either taking up a pension or increasing the size of their pension investment.
4.7 We suggest that the first of these requirements is covered by guidance rather than by the legislation itself, consistent with way this requirement currently applies to employers themselves.
Chapter 1 Extending Employers Freedom – Introduction
Chapter 2 Responding to the Consultation
Chapter 3 FSMA Two-Year Review Exemption
Chapter 4 Pensions Promotions to Employees
Chapter 5 Promoting Insurance Products
Chapter 6 Employee Share Schemes and Plans
Chapter 7 Partial Regulatory Impact Assessment
Chapter 7A Options – Legislate or Not
Annex A Current Pensions Exemption
Annex B Current Insurance Exemptions
Annex C Proposed New Legislation
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