The Financial Conduct Authority has reiterated its warning to firms offering “unsuitable pensions advice”, saying it will “not hesitate to intervene”.
In its 2018/19 business plan, released today, 9 April 2018, the FCA outlined “unsuitable transfer advice” as a “key activity” area, after some firms changed their business model following the introduction of pension freedoms in 2015.
Other areas the FCA said it will be focusing on was its Retirement Outcomes Review, understanding levels of undersaving in retirement and to better understand the non-workplace pensions market.
The FCA said: “Some firms have responded to the pension reforms by changing their business models in ways that potentially cause harm to consumers. We will not hesitate to intervene, where necessary, if we see evidence of firms providing unsuitable pension transfer advice.
“Our work will identify the extent of consumer harm and where and how we can intervene most effectively to stop it.”
The FCA said it would be collecting data across the entire pensions transfer market in an attempt to reduce the “actual harm” of bad advice, and last month announced it would be launching a consultation paper on whether to ban contingent charging.
Commenting on the need for new products to meet complex savers needs, FCA chief executive, Andrew Bailey, said: “This presents a significant public challenge, both in terms of the need for new and affordable savings products and in the information firms give consumers to help them take decisions.
“In the past year, we have been extremely concerned about some firms exploiting consumers’ lack of knowledge of pension products when advising them to transfer out of defined benefit schemes."
The FCA said that 37 per cent of all drawdown products are sold on a non-advised basis, despite firms pointing their members in the right direction.
Furthermore, the FCA said it was conducting a piece of research on savings adequacy to understand “which consumer groups are most at risk of experiencing a shortfall in their expected retirement provision”.
Hargreaves Lansdown head of policy, Tom McPhail, said: “There’s a strong case to be made for extending the FCA’s statutory remit beyond its current three objectives, to include an additional provision around actively seeking improvements to individuals’ long-term financial well-being.
The FCA’s current operational objectives are to protect consumers, protect the integrity of the market and promote competition.
“In the meantime, a paper looking at savings adequacy will be a step in the right direction", McPhail added.
Last month The Pensions Regulator and the FCA outlined a closer working relationship over the next decade, working on issues around scams, the pension freedoms inquiry, the auto-enrolment review and the defined benefit white paper.
In addition, the FCA reiterated its plan to deliver a remedies package on its asset management study, ensuring that fund managers have clearer objectives after estimating that three-quarters of the UK’s population are in some way exposed to the asset management sector.
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