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FSCP warns over RU64 removal due to NPSS

The Financial Services Consumer Panel has warned the FSA against the removal of the RU64 rule in the light of Turners NPSS proposals.

The FSCP says it is worried that with the introduction of the NPSS on the horizon and RU64 removed some firms could push personal pensions at people during this window, potentially leading to a new round of misselling.
It says RU64 removal in this context could cause consumers to take out a pension more expensive than they need, make them ineligible for the NPSS or make them disinclined to join the scheme.

It also warns that in the long term there is a need for an RU64 type rule as the lower charges on an NPSS need to be taken into account in assessing suitability.

The warning forms part of a letter to the FSA disputing industry claims that the FSA is controlling prices.

Financial Services Consumer Panel chairman John Howard says: “We believe that if the industry cannot justify selling personal pensions at a higher price, and is allowed to avoid the obligation of telling consumers about cheaper stakeholder products, this will be tantamount to misselling on a significant scale. So the industry and the regulator should brace themselves for widespread claims for misselling in the future, unless this rule is retained.”

Axa head of pensions and savings policy Steve Folkard says: Advisers need to have real clarity from the regulator in this area or we could see a period of planning blight where uncertainty over suitability of certain products for certain customers is caused by trying to anticipate the format that the NPSS, which may not be implemented until 2010, might take.

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