Government Actuary Chris Daykin has made a blistering attack on regulation and says the previous Conservative Government deliberately passed pension legislation knowing it would lead to misselling.
In an article for the journal of the Institute of Economic Affairs, Daykin accuses regulators of being “rigid and narrow-minded” in their criticisms of the selling of low-cost endowment policies.
Pointing to what he calls a bloated regulatory framework, Daykin accuses regulators of paying lip service to the need to have a principle-based rather than rule-based structure.
He says the principle of caveat emptor has been discarded in favour of increasingly expensive regulation, with the cost ultimately being borne by the consumer.
Daykin says the endowment misselling review placed too much emphasis on point-of-sale projections and not enough on how much of an improvement on previous products endowments were at the time they were sold.
He says: “The hype of the pension review and the extent of the punishment of insurers and advisers seems to pay scant attention to the fact that it was Government policy to encourage people to have freedom of choice. The decision to pass the legislation was taken quite deliberately.
“Notwithstanding advice, this would undoubtedly open the door to people making irrational and financially detrimental decisions and that misselling would result.”
Scottish Equitable pensions development director Stewart Ritchie says: “The main point that this reveals is that you cannot trust any long-term promise made by a Government when it comes to planning your retirement because they operate on such short timescales.”