FSRA releases guide to protect retirees, investors

Guide explains the new types of financial or decumulation products

FSRA releases guide to protect retirees, investors

The Financial Services Regulatory Authority of Ontario (FSRA) has released a new guide that will help educate and protect retired consumers, as well as those who are planning for their retirement.

The information guidance revolves around decumulation products and its difference from pension or insurance products. It also provides important questions that consumers should take into consideration before they begin investing.

“As more investors move into the phase of life where they're looking to find ways to live on their savings, this product area is likely to experience further growth,” said Stuart Wilkinson, chief consumer officer at FSRA.

Decumulation products are a new type of financial product that consumers can use in drawing down on their savings during their retirement without outliving the money they have saved.

The FSRA suggested that consumers who were considering investing in such products should first seek advice from a financial planner, life insurance agent, or securities advisor so that they may better understand what their investment may entail, what will suit them, and what guarantees may apply.

“Decumulation products may pool funds in an attempt to achieve investment and longevity benefits, but there are risks involved. Our Guidance is intended to help Ontario's aging population fully understand those risks before making an investment,” said Wilkinson.

The FSRA also stated that the marketing materials for such products may describe them as pension plans and may use terms associated with insurance like annuity, guaranteed income, income for life, or tontine.

However, the regulator asserted that decumulation products were not subjected to the same protections that come with registered pension plans or insurance products and that it carried a number of consumer risks.

These products were also not regulated by the FSRA as they were typically investment or mutual funds that fell under the regulation of the Ontario Securities Commission (OSC).

The entirety of the guidelines regarding decumulation products can be found on the FSRA website.