The FCA has come under fire for saying it has no plans to provide a “backstop” for consumers who spurn the offer of free guidance and make poor decisions at retirement.
FCA interim head of department for savings, investments and distribution Maggie Craig last week told Money Marketing those who choose not to take up the guidance service will be left to their own devices.
Craig (pictured) said: “We hope people take the guidance, we will have the usual supervisory work going on keeping a very close eye on products as they develop. If people choose to not take the guidance, they choose not to take the guidance.”
She added that existing rules already protected customers. “We already have rules around treating customers fairly, rules around suitability, around recommendations and, as things develop, if we feel the rules need to change to reflect the changes that come through in the market, then we will look at that.”
Earlier this month, Money Marketing revealed that Legal & General’s pilot offer of the guidance service was taken up by just 2.5 per cent of retirees.
Industry experts have warned that higher standards must be imposed on providers offering information to consumers to act as a ‘second line of defence’ to those who only interact with their provider.
Just Retirement group external affairs and customer insight director Stephen Lowe says: “This is a massive threat to the pensions freedom reforms.
“The problem is that people who do not take up the guidance will be left in the same position as they were before the reforms.
“The FCA had concluded there was market failure in the retirement market and poor consumer outcomes. Therefore, the treating customers fairly regime was not working and that will continue without a second line of defence.”
Alan Nedas Associates principal Alan Nedas adds: “I still see evidence of consumers rolling over into an annuity from their existing provider since the Budget announcement. There is a risk the default option will continue and providers will not give customers adequate information.”
Craig said one of the problems with the guidance was that its impact was hard to measure but hinted the Government was working on making the service a success.
She said: “It will not always be possible to prove the guidance guarantee caused xyz to happen. I’m sure the Treasury are looking very closely at developing some key performance indicators for the guidance guarantee even as we speak.”
Robin Keyte, director, Keyte Financial Planners director
It would be very disappointing if only a small number take up the guidance. Perhaps existing providers should refuse to deal with customers unless they have used the guidance service.