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MPs warn FCA of ignoring duties to pension savers

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.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. all good stuff but it ignores the follow on question – “who carries the can and pays the compensation if the regulator is at fault”

    Another argument for financial services compensation to be funded by a product levy without cost to innocent parties !

  2. This is a farce, no amount of guidance will protect savers and everybody knows it. To use this wndow dressing in order to lure savers into situations they do not understand is criminal.

  3. Unbelievable! The FCA’s fault? Really? How? .. I believe the Chancellor introduced the pensions freedoms which allow people to take all of their money out of their pensions and now the FCA has to sort the mess out in next to no time at all.

    If MP’s didn’t want for this then that’s their bag not the FCA’s.

    People will be told of their options no doubt, but if they are left to then choose their own path then its hardly a case of mis-selling is it?

  4. It’s like Governement deciding to issue everyone with a gun and then telling the Police that it’s their responsibility to make sure they’re used properly…

    This is a bout misbuying not miselling. If you give people choices then that’s the risk. Period.

  5. As Government caused the issue via the Chancellors changes, it should not be for the FCA to sort it out at levy payers cost, the gov’t should use taxpayers money for it or better still, what about the fines which used to be used to reduce levys on good firms which the Chancellor pilfered for the Treasury (stealth tax or what?)

  6. The Government introduces the new rules and then is already preparing for mud slinging at the industry – pension transfers and low cost/low start endowments spring to mind.

  7. Usual nauseating hypocrisy from self-serving politicians. How is regulation supposed to create a pensions utopia where people have (supposedly) unlimited freedom but also complete protection from making mistakes?

    The problem is not with the regulation (although there are certainly areas to improve). The issue is the unrealistic expectations set by the government in a ridiculously short timeframe, and the apparent unwillingness to accept that people can and will make mistakes that are not necessarily someone else’s fault.

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