The Financial Conduct Authority (FCA) has recognised there is a “potential problem” of a pensions mis-selling scandal.
Speaking at a seminar organised by the Tax Incentivised Savings Association (Tisa) in London today (24 November), Brian Corr, head of the retail competition department at FCA, said the regulator needs to “allow the market to provide consumers with choice”, but at the same time it needs “to identify where there is potential for a problem”.
He said: “I don't think that there is currently a mis-selling scandal as such, but we have identified that there is a potential problem.”
After the introduction of pension freedoms in 2015, defined benefit (DB) pension transfers have been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution schemes in order to access their cash.
The latest figures from the regulator showed that advice in more than half of the defined benefit transfers where the recommendation was to move the retirement pot was unsuitable or unclear.
Mr Corr, who started his regulatory career at the Personal Investment Authority in 1997, was involved in resolving the 1990s mis-selling scandal.
Several pension experts have argued that the government's decision to press ahead with pension freedoms is very similar to the one taken by then prime minister Margaret Thatcher's government, when it encouraged people to take out personal pensions back in the 1980s.
Facing the looming problem of an ageing population, Mrs Thatcher's government launched a campaign that actually encouraged employees to leave often generous occupational pensions and transfer to personal pensions with the intention of making the workforce more mobile.
This led in part to the pensions mis-selling scandal that was to hit many years later, in which many financial advisers were embroiled.
The pension mis-selling scandal that occurred in the late 1980s and early 1990s saw as many as two million people wrongly advised to opt out of occupational schemes and take out personal pensions.
According to Mr Corr, the FCA has taken some initial steps to examine the rules surrounding DB transfers, with a consultation on this matter conducted this year.
The regulator is currently working on the responses received in this consultation, with a report expected next year.