Labour peers are to propose last minute amendments to the Pension Schemes Bill that would introduce extra regulatory protection for consumers when they make decisions about how to use their pension savings.
The changes are due to be tabled on Monday during the House of Lords committee stage as the Bill nears the end of its route through parliament.
Four Labour Lords back the amendment including Baroness Drake, who holds positions at The Pensions Advisory Service, the National Association of Pension Funds and influential think-tank the Pensions Policy Institute.
Firms have been calling for a “second line of defence” to catch people who do or do not take up the Government-backed free guidance service to ensure they make an active choice rather than defaulting into buying a product from their existing provider.
In September 2014, Money Marketing revealed a pilot of the guidance service undertaken with L&G had a take up of only 2.5 per cent, fuelling fears many retirees would make retirement income decisions without using the service or speaking to a financial adviser.
But the FCA has so far resisted calls to introduce extra safeguards, saying existing regulations already “bite”.
The Lords amendment reads: “The FCA must secure an appropriate degree of protection for consumers whether they have used pensions guidance or otherwise throughout the decision-making and purchasing process, including safeguards to actively inform consumers of key risks and benefits.”
Just Retirement director Stephen Lowe says: “This important amendment should be supported by Government. It seeks to ensure regulators put in place requirements on product providers and pension schemes to put in place protections, particularly for those people who do not take up the offer of the guidance guarantee.
“The current conduct requirements on providers and schemes allows them to invoke a passive rather than an active approach to protecting people – particularly those who are making many obvious inertia-led poor decisions.”