Many of the issues surrounding advice in the pension market will not be solved until the question of liability is tackled, Chris Hannant has told a committee of MPs.
The director general of Apfa was giving evidence to the work and pensions select committee as part of its inquiry into whether the pension freedoms advice and guidance system is working.
He was asked by several MPs about how advice could be made available to a wide section of the public.
Mr Hannant said: “From my perspective the number one thing is the liability that attaches itself to advice.
“There is no time limit on when a complaint can be brought to the ombudsman but if there is a Tort claim in the civil courts the statute of limitations kicks in after 15 years. That is a long tail liability.
“The way of funding the FSCS also needs to be looked at.”
Mr Hannant questioned whether FSCS compensation should be offered universally, adding: “There should be a more narrow focus on products that are safer, not on unregulated collective investments schemes that the FCA says shouldn’t be sold to retail clients anyway.”
He gave evidence alongside Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown who backed Mr Hannant’s call for liability issues in the advice market to be tackled.
Conservative MP Richard Graham asked the panel what it would like the government to do in the Financial Advice Market Review.
Huw Evans, the director general of the ABI, told the committee that the government would have to find a solution to the insistent client issue
He said: “Parliament or the FCA or ministers need to resolve the tension on what happens to a customer who has got a safeguarded benefit and doesn’t want advice or cannot get advice but wants access to their money.
“We do not have the answer to that question yet and I think it needs to be resolved.
“If you have got safeguarded benefits from a pension scheme it is highly likely that it is not in your best interest to cash those in.”
Mr Hannant added: “If there is not safe harbour around advisers giving advice that’s negative for safeguarded benefits and if it can come back to haunt them then they will continue to refuse to provide that service.”
