In 2014 the Office of Fair Trading (OFT) produced a coruscating report on workplace defined contribution pensions leading to a charge cap being introduced and a ban on higher charges for those no longer contributing to schemes.
It is significant that it was the effective and sadly defunct OFT not the dozy FCA that sought to bring the industry to heel.
At the time many of us said: “Fantastic! Now what about personal pensions?”
At least a quarter of adults have money invested in the £400bn non-workplace pension market dwarfing the £168bn invested workplace defined contribution pensions.
Consider: an extra 0.01 per cent in charges on this is worth £40m a year. Over 30 years – a reasonable length of time for pension contracts – £1.2bn could be swiped from investors.
So why has it taken a further four years for the FCA to unveil a discussion paper on non-workplace pensions?
Laudable though this is, it raises as many questions about the FCA as it does about the pensions industry.
Take this, for example: “Through this project we would like to understand the level of annual management charges (AMC) on non-workplace pension funds, including to what extent and why they differ from the AMC on workplace funds, particularly where the same funds are available in capped workplace schemes and stakeholder schemes.”
Or this: “We would like to understand to what extent the charges on pre-2001 policies remain at pre-2001 levels in non-workplace pensions.”
Are these not things the FCA and its predecessor should have understood a very long time ago given the widespread coverage of the potential consumer detriment being caused?
The FCA further said it was “concerned that some older personal pensions may have a relatively high AMC when compared to modern versions of the same fund (bundled or unbundled), even within the same firm/scheme.” Well it jolly should be concerned. That is what it is there for.
Even the word “concerned” conjures up the image of a hapless old uncle rubbing his hands together while clueless about how to tackle a problem.
The FCA's own thematic review of the fair treatment of long-standing customers in the life insurance sector cited an example where the annual charge on a pension increased by 6 per cent when the policy became paid-up and, 22 years later, an exit charge reduced its value by more than 50 per cent.
Investors have been – and remain – exposed to vultures who pick over the bones of their savings.
A discussion paper is all very well, but it does feel like yet more jaw, jaw when what investors need is war, war.
Interest-only mortgage woes
Radio 4 featured a listener who had taken an interest-only mortgage in 2004 and had four years to pay it off. She had not repaid any.
While older interest-only mortgages backed by failing endowments was a problem created by insurers and salesmen, more recent ones are a different issue.