Pension transfers and insistent client advice are in the Financial Conduct Authority’s sights again, as it eyes industry-wide policy responses to government at-retirement liberalisation.
The regulator is also considering extending the payment via commission on non-advised product sales ban, including annuities.
Its actions are to ensure consumers have access to products and services “that are well governed and deliver value for money in competitive markets that work in their interests”, in light of pension freedoms introduced last April.
A paper published today (25 April) stated: “We expect to undertake more work on pension transfers and will be considering the responses and suggestions in more detail as we look at possible policy options going forward.”
It also revealed the FCA is considering widespread regulatory investigations into clients’ best interests and the handling of insistent clients, beyond pension transfers and to the wider pension landscape.
“This requires a more holistic view to be taken of any possible regulatory interventions,” the paper read.
The FCA acknowledged some of these issues have been around for a long time, but said pension freedoms - where from April 2015 over-55s were given unfettered access to their nest eggs - have “increased apprehensions of advising and transacting in some cases”.
This creates a risk that consumers will lose confidence in the ability of the industry to deliver on the promises of pension freedom, the document explained.
However, the regulator threw responsibility for ensuring its standards are met back on the industry.
“While we consider whether there is a need for us to undertake more work in this area, we believe there is a responsibility upon the industry itself to consider how it can deliver on customers’ expectations,” the paper said.
On pension transfer value analysis, the FCA was also scathing.
“We consider that the current TVA comparisons are unlikely to be helping consumers to be making informed decisions; this is because the included information is so overwhelming that it is doubtful if the document is being read.”.
In terms of commission payments on non-advised product sales, - including annuities, the vast majority of which are sold without advice - the FCA said further exploration was needed.
“High commission could be unnecessarily expensive for consumers. It could also carry the risk of bias, where third parties only sell annuities that offer the highest commission,” the paper noted.
But the FCA acknowledged it is unclear what advice might be available for consumers with small pension pots.
“Moreover, there is limited robust quantitative evidence on the nature and extent of any possible detriment. In addition, the implications may vary depending on the different pension pot size.”
The FCA will continue to talk to stakeholders over coming months and said it would welcome further input from interested parties on these issues.
