PensionsAug 6 2018

Pension probe could undo damage of British Steel saga

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Pension probe could undo damage of British Steel saga

Advisers are being urged to “rise to the challenge” presented by the work and pensions select committee's inquiry into pension costs and transparency, and undo some of the damage done by the British Steel Pensions scandal.

Following the committee's launch of the inquiry, Kay Ingram, director of public policy at national firm LEBC group, said this was an opportunity for IFAs to encourage MPs to pressurise the Department for Work and Pensions (DWP) to introduce the pensions dashboard amid speculation that the government may abandon plans.

The inquiry also presents an opportunity for IFAs to undo some of the damage done by the British Steel Pensions scandal, she commented.

Ms Ingram also said now was a good time to place pressure on HM Treasury to reform pension savings tax.

"There is a need to engage consumers with their pensions. While the committee is right to ask questions about pricing, there are many more aspects to the need for greater consumer education," said Ms Ingram.

"I hope we can encourage the MPs to put pressure on DWP to launch the dashboard, on the Treasury to reform pension savings tax and on the Government to introduce a cooling off period for non advised access to pension freedoms so that no one gets a surprise tax bill or restrictions on future pension saving without being warned about this before they take their money."

MPs need to recognise the pivotal role of independent financial advice in improving the savings ratio and retirement outcomes. Kay Ingram

The inquiry, which was unveiled on Friday 3 August, will examine whether or not consumers are getting the most out of their pensions and if enough is being done by providers to inform them on how their money is being invested, what they are charged for and the impact of costs on retirement outcomes.

The committee has previously criticised advisers involved in the British Steel Pensions scandal for coercing customers into choosing unsuitable pensions products and signing up to contingent charges when transferring out of their defined benefit (DB) schemes.

The Financial Conduct Authority has since taken on the responsibility of reviewing contingent charges by DB transfer agencies and will report back to the committee in the Autumn.

The market is hoping for more "joined up thinking" and recognition from the committee of the interconnected nature of regulatory reforms being carried out.

Andy Agathangelou, founding chairman at the Transparency Task Force, said: "Given the enormous impact that costs, charges investment strategy and performance have in driving outcomes for pensions savers it is good news that the Work and Pensions Committee has decided to open this inquiry.

 "There is a universal shared interest among policymakers, regulators, ethical product providers, client-centric intermediaries, campaigners and of course consumers that pension savers get the best value for money they can; everybody should be supportive of the move.

"Furthermore, because there has been extensive connected activity in this space from the FCA, DWP, TPR, CMA and other actors I hope that Frank Field’s committee helps to create a comprehensive understanding of how the totality of the regulatory reforms underway interconnect. In short, we need more joined-up thinking and this will help."

Market professionals have said that IFA engagement and input into the review could help to undo some of the reputational damage done by the British Steel Pensions scandal.

IFAs are being urged to give input to the review and present the benefits the financial advice brings to consumers.

Sir Steve Webb, director of policy at Royal London and former pensions minister, said: "It is vital that advisers engage with this inquiry.

"The select committee has obtained a very negative impression of financial advice because of the British Steel saga, and there is a danger that they will produce another negative report, further damaging the reputation of the profession.

"Royal London will be sharing our research with the Committee which shows the clear financial value to clients of taking financial advice. This is an opportunity to tell a positive story about the value of advice and we need to take it."

Ms Ingram added: "Widening access to financial advice is key to successful retirement outcomes and it is up to IFAs to rise to the challenge of providing affordable advice.

"MPs need to recognise the pivotal role of independent financial advice in improving the savings ratio and retirement outcomes, but IFAs need to find ways of servicing the wider market if they want to remain relevant to this debate."

rosie.quigley@ft.com