The FCA’s explosive review into closed-book providers has exposed the “massive failure of the treating customers fairly regime”, say advisers.
Advisers say providers have finally been held “bang to rights” as the FCA investigates six firms for widespread failings around how they treat closed-book customers.
Following the review six out of 11 providers have been referred to enforcement over exit and paid-up charges, which advisers say shows treating customers fairly rules have failed customers.
Two providers – Old Mutual and Abbey Life – will also be investigated over other broader failings uncovered by the review.
The review covered products that closed before 2000 while the follow-up will include firms’ behavour after 2008 when the FSA updated guidance on treating customers fairly.
Rowley Turton director Scott Gallacher says: “Given that we are having to be whiter than white, I do not think it’s unfair to ask pension providers to do the same thing.
“This is a massive failure of the whole TCF regime, and the FCA must bear some blame too.”
Page Russell director Tim Page says: “The biggest issue is disclosure and in that sense they are bang to rights. It’s a classic case – like how Al Capone was done for tax evasion, not racketeering.
“Every IFA in the land will have been frustrated by having clients stuck suffering massive exit penalties and poor charges in the meantime. The insurers have have a good run, they’ve been farming this money for donkey’s years. They knew it was not going to last but now various initiatives are forcing them to change.”
Fairey Associates managing director Ed Fairey says firms cannot excuse their behaviour by claiming high charges reflected normal rates when contracts were written.
He says: “The contract law point is a moot point. All providers set out charges at inception but they also reserve the right to change their charges at any time. They all give themselves that flexibility, if they have the will to remove the exit charge then of course they can do it – the fact they don’t want to speak volumes for those businesses.”
However, the ABI claims the review shows there is “no systemic intention to take advantage of customers”.
ABI director of regulation Hugh Savill says: “We are pleased that the FCA has found no evidence of any systemic intention to take advantage of customers in older closed book products. However, this report highlights that more needs to be done to improve governance of and communication with customers with older style products. We will be discussing with members and the regulator ways to ensure that this happens.”
The review covered products sold pre-2000 by 11 firms who hold £153bn of savings in closed-book products across 9.4 million customers.