The Personal Finance Society has welcomed confirmation from Chancellor Jeremy Hunt that the EU’s Packaged Retail and Insurance-based Investment Products (PRIIPS) regime will be replaced with a new UK-focused regime.

The Autumn Statement this week confirmed that the Chancellor will move ahead with his post-Brexit Mansion House reforms including the replacement of the PRIIPS regime.

The PRIIPS regime was introduced by the EU in 2018 and provides rules for the Key Information Document (KID) given to retail investors covering product details such as risk, costs and rewards.

The aim of the PRIIPs Regulations is help investors to compare the key features of retail investment products from different providers. Most packaged investment products are covered by the regime

According to current FCA regulations a PRIIP manufacturer is required to prepare a KID for each PRIIP that they produce and publish each KID on their website.

A person who advises a retail investor on a PRIIP or sells a PRIIP to a retail investor must provide the retail investor with a KID in good time before any transaction is concluded.  

Dr Matthew Connell, director of policy and public affair for the PFS, said that the PFS welcomed the commitment as a chance to introduce a much better regime of disclosure.

He said that the current regulations allowed “poorly researched” documents to be given to investments and the information provided was often not good enough.

He called for a replacement regime to be thoroughly tested before being introduced.

He said: “These regulations dictate how firms should present information to consumers about their investments, and they were poorly researched before they were introduced, which means consumers are not getting the good quality information they need about their investments.

“The new regime should be thoroughly tested with both consumers and providers to ensure the information provided is clear, fair and not misleading.”

Dr Connell said that the government could also go further and seize more opportunities post-Brexit, including reforming the FSCS by introducing a levy on all funds under management to pay for it.

He said: “There are other opportunities that the Government can take as a result of Brexit. As pension investments become more individualised, consumers will increasingly need advice throughout their lives on investing in a pension and drawing an income from it. The Government can increase access to affordable advice by reforming the system for paying consumer compensation.

“Currently, this is funded by a mixture of compulsory professional indemnity insurance and FSCS levies. Both these mechanisms impose volatile, unpredictable costs on advice firms, making it difficult for them to grow and provide services to a wide range of consumers. A different system, based on a levy of all funds under management, could provide the same level of compensation for consumers while imposing much more manageable and predicable costs on investment funds.

“It is great news that investors could have more in their investment pots as a result of innovation and better regulation, but without access to advice, many of these achievements will not produce the right outcomes for consumers.”

The Personal Finance Society is a professional body with 40,000 members and provides the Chartered Financial Planner designation.