The Government has warned that a Labour proposal TO force all pension schemes to refer members to an independent annuity broker risks creating “the next misselling crisis”.
Labour peer Lord Browne proposed an amendment to the Pensions Bill last week that would require all workplace schemes to direct members to an independent annuity brokerage service when they reach retirement.
Browne argued the amendment would “strengthen the buyer side” of the annuity market and “help divert us away from the next financial misselling scandal”.
Responding for the Government, Department for Work and Pensions minister Lord Freud said: “Making annuity brokers the first port of call for all would simply create a captive market for one part of the industry without effectively adding to consumer protections. Annuity brokers, unless they are also FCA-regulated advisers, are not required to ensure that the product is suitable for the consumer.”
He cited the report from the Financial Services Consumer Panel in December which highlighted the risks of going down the non-advised route, and called for a code of conduct for non-advised annuity sales focusing on disclosure.
Lord Freud said: “This measure [on broker referrals] would therefore push people down a brokerage route and could lead to the next misselling crisis, not help to avoid it. The amendment as it stands would mean people would be pushed into receiving non-regulated advice and might end up locked into unsuitable products without recourse to the protections that regulated advice affords.
“The measure also focuses almost exclusively on annuities; it makes reference to information on alternative at-retirement products, but it has to be recognised that annuity brokers are not necessarily impartial – they make their money if a member buys an annuity.
This Government’s position is it is essential for people to understand all their options, not just annuities.”
The amendment was rejected by a majority of 197 to 131.