MPs have warned the FCA that allowing customers to buy pensions on their own will lead to a “misselling issue” in the next few years, as the regulator is warned on ignoring its responsiblities to savers.
Speaking at a Department for Work and Pensions select committee inquiry into auto-enrolment today, Liberal Democrat MP Mike Thornton told FCA director of policy, risk and research Christopher Woolard and FCA policy director David Geale he was “very worried” about the regulator ignoring its duties.
He says: “I’m very worried you’re putting away your responsibility to talk about what providers should do for their customers. I’m sorry, you’re the FCA – how providers act towards their customers is at the centre of your responsibilities.”
He warned unless the regulator introduced a “second line of defence” to protect people who do not take advice or use the Government-backed guidance service, there would be a “misselling issue”.
Under the latest FCA proposals, providers are required to push their customers towards seeking advice or guidance before making a decision about how they use their pots. They are then supposed to encourage them to use the services but cannot force them to.
Thornton said: “Before they sign that contract that puts their money, maybe permanently, into something, these questions should be asked in a way that makes people think, ‘have I thought about that?’
“If it’s not there when the contract is signed, you’re going to get a misselling issue and in five years’ time we’ll bring you back and say we warned you this would happen but you didn’t do anything about it – and you won’t enjoy it.”
Labour MP Teresa Pearce also pushed the regulator over the protection it will afford non-advised consumers after April.
Geale said: “Our rules require providers to tell customers about the implications of the decision they are making – so if you choose to take a standard annuity they are required to tell you you could get a better one if you are in ill health. They would also be required to tell you that you could get a better rate by shopping around.
“What they won’t do through the rules, though providers can still do this, is ask specific questions and actually giving advice.”
But Pearce said providers should be forced to do more.
She says: “Just saying to these pension companies ‘don’t be bad, be good’ isn’t enough. They have to have to do things. Some will, most won’t.
“They need to be required, and if they are not required and people fall foul of this it’s the FCA’s fault.”