The chairman of the Work and Pensions select committee has criticised the Financial Conduct Authority for wasting time consulting on a contingent charging ban on pension transfers instead of pushing through new rules in this area.
Independent Labour MP Frank Field (pictured), who vowed to push for legislation on a contingent charging ban if the regulator didn’t act, has criticised the watchdog's slow action on this matter.
He said: “A mere eighteen months after we warned that a major mis-selling scandal was erupting, the FCA is at long last lumbering into action – not action against the thieves who are stealing people’s pensions, but asking for more consultation.
“It’s like the Good Samaritan going out to consultation before he acts.”
Mr Field added: “How many more savers are going to have their savings pinched from them before the FCA lifts a finger?
“The FCA’s own research shows that huge numbers of pensioners are being fleeced right now by unscrupulous advisers with glaring conflicts of interests. Let’s hope they finally put an end to this racket.”
Contingent charging means a client only pays for the advice if they go ahead with the transfer, which the FCA is concerned could create a conflict of interest and lead to more people being told to transfer.
In a consultation paper published this morning (July 30) the watchdog stated that given the advantages of defined benefit pensions, the proportion of consumers being advised to transfer out was too high.
Therefore, the FCA proposed a ban on contingent charging, with the exceptions of specific groups of consumers in certain identifiable circumstances, such as people suffering from serious ill health or experiencing serious financial hardship.
The FCA had already consulted the industry on contingent charging last year but decided against a ban in October, despite finding widespread problems in the suitability of pension transfer advice.
Keith Richards, chief executive at the Personal Finance Society, said: “A second consultation on contingent charging was inevitable following recent calls from politicians and consumer groups for an outright ban, despite the FCA having previously undertaken a consultation and concluded that contingent charging alone wasn’t the cause of poor practice and confirmed that it had decided to take no further action.
"Whilst it may have been intuitive for the Work and Pensions select committee to assume that contingent charging drove the behaviours of a small minority of advisers in the British Steel debacle, it was reactive and clearly at the time without fact-based foundation, if however the FCA have now gathered conclusive evidence as part of their current supervisory work, then consulting on options to mitigate the conflict is a logical course of action to take."
Edwin Schooling Latter, the FCA’s director of policy, told FTAdviser that the FCA will continue with its supervisory work in this area to limit consumer harm.
He said: “Firms have been visited by our supervisors, and where we do find that there has been poor practice that will be followed up.