Industry warns against FCA-driven charges comparison

Industry warns against FCA-driven charges comparison

Advisers and providers are concerned that a Financial Conduct Authority (FCA) led comparison service on non-workplace pension providers’ charges will distort consumer views, as it may not take into account investment choice or quality.

The FCA announced today (July 30), as part of its research into competition in the non-workplace pensions market, that it will consider collecting and publishing all fees charged by self-invested pension providers (Sipp) and other non-workplace pension schemes.

The regulator said the information would be collected and collated by an independent body, which would most likely be the FCA.

The FCA would then aggregate this information into a single dataset and make it publicly available, making it easier for individuals to compare providers and value for money.

Non-workplace pensions are products such as individual personal pensions, stakeholder personal pensions, and self-invested personal pensions (Sipps).

They also include free standing additional voluntary contributions (FSAVCs), s32 buyouts, and retirement annuities.

Currently there is little switching between these type of pension products as consumers do not understand whether or not they are getting value for money with their pension pot and investments, the FCA said.

But advisers have raised concerns that a focus on charges would ignore factors such as investment choices and quality, with consumers likely to pick the cheapest provider without taking other issues into account. 

Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, said: “There are quirks in charging so it’d be hard to compare like-for-like without an IFA tailoring the charges for each individual, or at worst, some providers 'game' the system to appear cheapest.

“The focus will be on 'charges' like a comparison website, hence factors such as the quality and features of a product, customer service and financial stability of a provider would likely be ignored."

He added: “In addition, the danger is that it’s hard to include fund charges unless each provider provides a 'default' fund, which may not actually reflect the real charges a client may pay.

"For example, a provider could simply use a cash fund paying near 0 per cent charges, but the client may incorrectly think it’s the cheapest, and then end up in an expensive fund that they’ve chosen.”

Similarly, Greg Kingston, group communications director at Sipp provider Curtis Banks, said: “My main concern is that an FCA-driven price comparison table will try and compare fundamentally different products designed for different purposes on price alone. 

“That would risk artificially distorting markets, plus expose the regulator to risks of consumers making decisions upon the data that they publish.”

Meanwhile, both providers and advisers suggested that the regulator was not the right body for the job.

Mr Chan said: ”Unfortunately, whilst I respect the FCA’s role, I have little faith in them doing this competently if they cannot even get their FCA register done properly and making it user friendly.”

James Jones-Tinsley, Sipp technical specialist at Barnett Waddingham, said: “The FCA should stick to being a regulator and focus on the functioning of the market and encouraging competition and innovation, rather than acting as yet another data provider.