FSA told Consumer Focus that 'pension churn' survey was flawed
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Government-funded Consumer Focus published its scathing pension-switching report on IFAs despite FSA concerns about the size of the sample used to back up its findings.
In July, Consumer Focus produced a report, Is it Advisable?, which suggested IFAs and trail commission were responsible for an unacceptable level of pension churning which led clients into high-charging funds. It warned the problem will continue after the RDR. The research was picked up widely by the consumer media, resulting in a large amount of negative coverage about IFAs.
Money Marketing attacked the research for a lack of evidence to back up its claims, which were based on just 31 examples of client correspondence from two IFA networks over a 10-year period.
An email from the FSA to Consumer Focus dated March 7, obtained by Money Marketing through a Freedom of Information request, reveals concerns about the sample size used by Consumer Focus in a draft of the report, which at the time stood at 25. The FSA said it was “very small” and “not necessarily representative of the market”.
The final report also made reference to the FSA’s investigations into Sipp transfers from 2008 and 2010 and implied the findings were representative of the IFA marketplace. The report claimed: “It is far from clear that the situation has improved.”
After the publication of the report, FSA director of policy Sheila Nicoll wrote to Consumer Focus chairman Christine Farnish stating the findings of the 2010 review “should not be extrapolated” to represent the wider market, according to documents obtained by Money Marketing.
The report cost Consumer Focus £68,000 to produce, according to a further FoI request.
Consumer Focus chief economist Prashant Vaze says: “We have always been clear we looked at a small amount of correspondence from IFAs. We would have liked to review more but we had a poor response to our statutory request for data from advisers, insurance companies and the trade association. Although both our research with IFAs and the FSA’s reviews were based on small sample sizes and are not definitively representative of the whole market, we believe three snapshots showing similar problems warrant a bigger-picture look at the issue by the FSA.”
Informed Choice managing director Martin Bamford says: “It was extremely irresponsible for Consumer Focus to form conclusions based on shaky evidence. The negative headlines generated about pensions and pension advice by reports like this can have a really damaging impact for individuals who might, as a result, choose not to save.”
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Readers' comments (15)
Simon Carter | 15 Sep 2011 9:16 am
Seriously. The FSA is complaining that a sample size is too small, and not representative. Seriously. Really?
The FSA has implemented changes that will remove access to advice to the majority of the population, have caused untold stress, have removed major advice providers from the market, and turned the advice market on its head on the evidence of a tiny sample of Australian Advisers!!!
Every day I wonder if I will see something else that you couldn't make up...
Here is today's!!
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Greg | 15 Sep 2011 9:18 am
Quango .... justfying thier funding ... says it all really.
Hardly doing anything constructive except causing more unnecessary fear for the financially illiterate.
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Alan Lakey | 15 Sep 2011 9:18 am
Is this the same FSA that used an outdated and flawed Australian survey in order to support its RDR predations?
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David | 15 Sep 2011 9:21 am
So, on my sample size of one, I can say that Consumer Focus have failed.
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Patrick Schan | 15 Sep 2011 9:31 am
Is this the report that Moneybox 'guru' Paul Lewis ran with, on TV and radio? If so will he apologise for the damaging impression he gave?
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Neil Walker | 15 Sep 2011 9:35 am
And £68,000 to produce the report!
Obviously the IFA community paid for another report to put yet another nail in our coffin!
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Neil Walker | 15 Sep 2011 9:36 am
I'll rescind that last comment - I should've read the first line of the story!
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Anonymous | 15 Sep 2011 9:37 am
£68k for a report based on a couple of dozen pieces of 'evidence' all paid for by the taxpayer / consumer? Just yet another example of the quango gravy train where money is squandered by those who probably know little about what they are squandering it on but who also do not give a 'fig' as they are not personaly responsible and are simple more concerned with the next travel claim to get them onto the next 'committee' or tax payer funded junket. Ignorant, arrogant, useless parasites!
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Old Dog | 15 Sep 2011 9:57 am
Even a chimpanzee would know that a 25 sample, ain't a sample worth a jot.
Puts the FSA policymakers' intellect somehere between a fruit fly and a bluebottle.
God help us if they move into the field of eugenics.
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ian marsh | 15 Sep 2011 11:12 am
So why the surprise?
Its the 'Brewery' syndrom all over again.
How long can we go on seeing the failures and poor decison makers in postions of authority?
We are stupid to let it continue,where is our strength?
I am ready for the next blog!
Frustrated of 'everywhere'.
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