Banning unregulated investments in self-invested personal pensions is essential to regain the trust of consumers in financial services, a report has concluded.
The Transparency Task Force yesterday published a 49-page report (May 16) highlighting the loss of consumer trust in financial services and has called for proposals, such as a ban on unregulated investments in Sipps, to be introduced to regain consumer confidence in the industry.
The TTF is calling for regulators to pre-empt problems in pensions and finance rather than dealing with losses after they have happened, fand one way to do this would be to ban unregulated investments in pensions.
Data out on Wednesday (May 15) showed the number of Sipp complaints referred to the Financial Ombudsman Service increased 86 per cent to hit 3,811 in 2018/19, up from 2,051 in 2017/18.
Sipps also topped the list of the most complained about products against IFAs, with the ombudsman resolving 232 complaints with an uphold rate of 62 per cent.
And this hike in Sipp complaints to the Fos is expected to continue as more misadvised clients and claims management companies bring forward cases.
Many Sipp complaints typically relate to unregulated assets in Sipps that have later failed.
Former pensions minister, Ros Altmann, who has been appointed as the TTF’s 100th ambassador, said: "Cold-calling and unregulated 'introducers' have enticed unsuspecting individuals to invest their pensions in bogus schemes which have subsequently collapsed.
"If the sector wishes to regain the trust of consumers, it seems essential that new approaches are adopted."
A report by accountancy firm PwC published in September 2018 showed that 57 per cent of individuals believed that reforms to regulation, implemented since the financial crisis in 2008, were not enough to guarantee that negative history would not repeat itself.
It also showed that only 28 per cent of consumers trusted financial advisers.
Ms Altmann stated: "Although the public think that financial institutions' main role should be safeguarding people's money, there is a sense of disillusion and scepticism about the motives of financial firms.
"Rogue traders, lax regulation and unregulated products have caused major scandals and losses, feeding the perception that regulators are always behind the curve, sweeping up after the fact, rather than pre-empting and preventing problems in the first place."
The TTF’s report stated that work to improve confidence in the industry must include the pensions and investments sector because, according to Office of National Statistics data (published in March 2019), the UK is experiencing the lowest savings ratio since records began in 1963.
The industry task force has stated that trust in the pensions sector must be improved to avoid "mass pension poverty in the future".
In order to encourage saving the government will this year launch the first prototype of a pensions dashboard, allowing savers to see all their pension savings in one place.
But Ms Altmann warned: "The pensions industry has ongoing problems. Error rates in auto-enrolment and other pension data must be identified and corrected, so that a reliable pensions dashboard can be delivered."