Outgoing Financial Services Compensation Scheme chief executive Mark Neale is calling for consumer protection to “increase significantly”.
In a speech to be delivered later today at the UK Finance’s Retail Banking Summit, Neale (pictured) will outline his views of the organisation and the future of consumer protection from financial services products.
He will say that the FSCS protection should increase so that no consumer is at risk of losing a major part of their pension if they are mis-advised on how to invest.
More than 60 per cent of the £3.3bn paid out in compensation costs during Neale’s tenure were as a result of mis-selling or poor advice, the FCSC says. A significant proportion was due to “bad advice” to transfer money from occupational schemes in order to invest in risky and illiquid assets, usually held within a Sipp.
The FCSC has paid out compensation of £581m for claims in the five years from 2014/15, compared with £80m in the four preceding years (from 2010/11 to 2013/14) before the pension freedoms took effect – a rise of 626 per cent.
Neale will say: “FSCS’s compensation payments are an index of a market in trouble, which is highlight by the fact that claims and payouts are rising. It is sobering that a substantial portion (61 per cent) are as a result of mis-selling or bad advice. It results from a market characterised by a bewildering array of products, by complexity – some deliberate – and by profound information asymmetry.”
The speech continues: ““It is delusional to think that any regulator could police such a fragmented market to anticipate harm before it manifests itself, rather than to react to its occurrence. Consequently, I advocate prioritising protection of the consumer over maximising choice. This means better and clearer incentives to save for retirement; simpler products and more default options; and better targeted communications, including about FSCS, when they matter to consumers.”