The FCA’s new ‘second line of defence’ requirement for pension providers risks exposing savers to unscrupulous firms and scams, The People’s Pension warns.
In a letter to the FCA, the auto-enrolment scheme says the last-minute requirement could lead to providers deciding not to provide flexibilities for the smallest pots, Money Marketing understands.
In response to fears that people who did not take up the Government’s guidance service would lose out, the regulator announced in January it would be introducing new rules that mean providers have to give “relevant risk warnings” to customers when they attempt to access their retirement savings.
The rules come into force in April at the same time as the pension freedoms, but are not expected to be published until March.
In the letter, The People’s Pension says providers are already struggling to be ready for the Government’s changes to the pensions system by April. It says consumers may be forced to transfer to other firms to access the flexibilities as providers step back from offering all the options because resources are too stretched.
It also warns a new market of unscrupulous firms and scammers could develop to serve people denied full flexibility by their existing providers.
The People’s Pension head of policy Darren Philp says: “The FCA threw a curve ball in with its Dear CEO letter. It’s caused us quite a lot of concern and frustration. We want to offer the flexibilities but we think the FCA’s late intervention makes it difficult or even impossible for providers to be ready by April – how can that be in consumers’ interest?”
The scheme calls on the regulator to exclude small pots – below £10,000 – and people who have already used the Pension Wise service from the requirement to ease the regulatory burden on providers.
Chase De Vere auto-enrolment delivery manager Sean McSweeney says: “Providers are going to have to balance members’ appetite to access their pension with the cost of administering access. And there’s going to be pension liberation people sneaking about, so the FCA has to have some protection. Both the FCA and The Pensions Regulator need to work out how to monitor the risk of liberation and if they water down the rules too soon they’ll get blamed.”