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ABI accepts FSA’s criticisms of providers in pension switching report

The Association of British Insurers has admitted “shortcomings” in life offices’ Sipp offerings and the information they provide advisers and their clients after the FSA voiced concerns in its report on pension switching advice.

In the report, which was due to be published on Tuesday but was rushed out this afternoon after Money Marketing leaked the findings, the regulator warns that some providers have been overstating returns and understating charges.

It says: “We were concerned that some providers seemed to us unlikely to be complying with the rules requiring lower projection rates to be used where the standard rates in the conduct of business sourcebook would overstate the investment potential. We saw cases where the provider used the standard 5 per cent, 7 per cent and 9 per cent rates of return to project for cash. Issuing such projections for transfer comparison purposes is likely to overstate the potential growth.”

The FSA added that it would be “pursuing” its concern about the potential mis-use of standard projection rates and says it is considering looking more widely at firms’ compliance in this area.

ABI director of life and savings Maggie Craig says: “Our continuing work to simplify Sipp customer information, and further improve the customer experience through Treating Customers Fairly, has led to improvements across the pensions industry, and we are pleased the FSA has acknowledged this.

“However, this report shows that in some cases, there have been shortcomings on Sipp customer and adviser information and product design. The pensions industry is committed to ensuring that customers and advisers have adequate and accurate information on pension products. Where more improvements are needed, ABI members will act swiftly to put them in place.”

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